Question

a. What is the relationship between the price of a bond and its YTM? b. Explain why some bonds sell at a premium over par value while other bonds sell

at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling atparvalue? c. Dote Plc has 8.5 per cent coupon bonds on the market that have 12 years left to maturity. The bonds make annual payments. The par value of the bond is£1000. If the YTM on these bonds is 7.2 per cent, what is the current bond price? d. Kipi has 8 per cent coupon bonds making annual payments with a YTM of 7.2per cent. The current yield on these bonds is 7.55 per cent. How many years do these bonds have left until they mature? e. Keele has bonds on the market making annual payments, with 12 years to maturity, and selling for €1,045. At this price, the bonds yield 7 per cent. The par value of the bond is €1000. What must the coupon rate be on the bonds?

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