Consider two bonds: a 5-year coupon bond with face value $3000,
and a consol bond. Each bond pays a coupon annually of $300 and has
initial yield to maturity of 6%.
1. Is the price of coupon
bond above, below or equal to the bond's face value?
Below
Can't be determined from these information.
Above
Equal
2. What is the price of
the consol?
$1800
$5500
$2830.19
$5000
3. What is the price of
coupon bond?
$3505.48
$1263.71
$2242.02
$3502.95
4. At the end of the first
year, the yields on all bonds unexpectedly rise to 10%. What is the
one-year rate of return on the consol bond?
-34%
32%
-40%
36%