Predicting Bond Values. Bulldog Bank has just purchased a bond with 9 years remaining to maturity,...

Predicting Bond Values. Bulldog Bank has just purchased a bond with 9 years remaining to maturity, and a coupon rate of 5 percent. It expects the YTM on these bonds to be 5 percent one year from now. The bond makes semi-annual payments.
a. At what price could Bulldog Bank sell these bonds for one year from now?

Solutions

Expert Solution

Assuming face value to be $1000

If YTM is equal to coupon rate, bond should sell at its face value. Here, in one year coupon rate of 5% will be equal to YTM of 5%.

Therefore, price in one year from now = $1000

jeff jeffy answered 2 years ago

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