Answer to Question #6022 in Economics of Enterprise for LaMarcus Streeter
a. Bond A’s current yield will increase each year.
b. Since the bonds have the same YTM, they should all have the same price, and since interest rates are not expected to change, their prices should all remain at their current levels until maturity.
c. Bond C sells at a premium (its price is greater than par), and its price is expected to increase over the next year.
d. Bond A sells at a discount (its price is less than par), and its price is expected to increase over the next year.
e. Over the next year, Bond A’s price is expected to decrease, Bond B’s price is expected to stay the same, and Bond C’s price is expected to increase.
expected to stay the same, and Bond C’s price is expected to
Because, bond C has the best among the other and its price will
become higher, but the Bond A's price will decrease as its coupone is lower.
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