Wed 28 May, 2014 06:24 pm
The 1-year to 5-year spot rates are 3%, 3.5%, 4%, 4.5%, and 5%, respectively. Consider a 5-year, 6% annual coupon paying bond? The face value of the bond is $1,000. Which of the following statements are true?
i. The price of the bond is $1,048.45
ii. The yield to maturity is 4.88%
a. i only
b. ii only
c. Both i and ii
d. None of the above
d. Rates are based on value of the asset at the time of the quote.
The price of a 5 year bond with a coupon of 6% payable annually at a yield of 4.88% p.a. is $1,048.65.