The ABC Corporation issues a very unusual type of bond on July 1, 2010. It is issued in units where the face amount is $1000 and the redemption amount is $1500 at July 1, 2020. Semi-annual coupons are payable January 1 and July 1 an are as follows: What should the initial offering price per unit be if the yield to maturity is to be 10% per annum compound semi-annually?
Hence: YTM=10*21000x-1=0.12=0.05x≈$376.89The initial offering price per unit must be $376.89
b) Is this a premium or a discount? Specify the amount. Since the payments for semi-annual coupons are started from $60 (which is 6% of Continue reading...