Two 1000 dollar face value bonds are both redeemable at par, with the first having a...

Two 1000 dollar face value bonds are both redeemable at par, with the first having a redemption date 3 years prior to the redemption date of the second. Both are bought to yield 11.6 percent convertible semiannually. The first bond sells for 773.3 dollars and pays coupons at 7.9 percent convertible semiannually. The second bond pays coupons at 5.2 percent per half year. What is the price of the second bond?

Expert Solution

No. of years for the first bond 11 years (22/2)

So no. of years of maturity for second bond is 8 years (11 years-3 years)

Hence price of the second bond is $938.5

jeff jeffy answered 2 years ago

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