Bond X is a premium bond making annual payments. The bondpays an 8 percent coupo

Question

Bond X is a premium bond making annual payments. The bondpays an 8 percent coupon, ha s. a YTM of6 percent, and has 13 years to maturity. Bond Y is a discount bondmaking annual payments. This bondpays a 6 percent coupon, has & YTM of 8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged. What do you expect the prices of these bonds to be in 13 years? (Do not include the dollar signs (S). Enter rounded answers as directed, but do not use the rounded numbers in intermediate calculations. ) Bond X Bond Y

Explanation / Answer

assuming that the bonds FV is $1000 Prices of bond X= 80 PVIFA(6%,13)+1000PVIF (6%,13)= $1177.054 Prices of bond Y= 60 PVIFA(8%,13)+ 1000 PVIF (8%,13)= $841.92448

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