Suppose you bought a government bond with face value $1000 with coupon rate 10%. a) If...

Suppose you bought a government bond with face value $1000 with coupon rate 10%.

a) If the bond matures in 2 years, what price should you pay for the bond today to earn a yield of 8%?

b) If the bond matures in 10 years, what price should you pay for the bond today to earn a yield of 10%?

c) For a bond that yields 15% return, what do you expect the price to be relative to the face value? (i.e. higher or lower or equal to face value?)

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jeff jeffy answered 1 year ago

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