Question

Bond P is a premium bond with a coupon of 5 percent , a YTM of 6.64 percent, and 16 years to maturity. Bond D is a discount bond with a coupon of 5 percent, a YTM of 9.56 percent, and also 16 years to maturity. If interest rates remain unchanged, what is the difference in the prices of these bonds 5 year from now? (i.e., Price of Bond P - Price of Bond D) Note: Corporate bonds pay coupons twice a year. (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

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Bond P
Face Value(FV)	$ 1,000.00
Coupon Rate	2.50%
Coupon Amount (PMT)	$        25.00
Yeild( Rate)	3.32%
Period(NPER)	22
Bond Price P	$873.41
Bond D
Face Value(FV)	$ 1,000.00
Coupon Rate	2.50%
Coupon Amount (PMT)	$        25.00
Yeild( Rate)	4.78%
Period(NPER)	22
Bond Price P	$693.77
Difference(Price of Bond P - Price of Bond D)	$179.64