Exam 10: Bond Prices and Yields

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Last year, BT Motors issued 10-year bonds with an 8% coupon and semiannual interest payments. What is the market price of a $1,000 bond if the yield to maturity is 7.8%?

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To immunize your portfolio, you should:

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A bond has a current yield that is equal to the yield to maturity. Given this, which one of the following must also be true?

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You own a 5.5%, semiannual coupon bond that matures in 8 years. The par value is $1,000 and the current yield to maturity is 6.4%. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

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