- Oct 23, 2001
- 5,701
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In the textbook, I come across this question:
"There are two annual coupon bonds A & B where A is a 12% coupon bond selling at a premium and B is a 8% bond selling at a discount. Currently the yield to maturity for bonds is 8%. Compute the price of A and B."
I thought as long as ytm = coupon rate, then the price of bond is always selling at par. Then how can bond B selling at a discount?
Also let's say there is a semi annual coupon bond, is the YTM a six month effective rate*2 or is YTM the effective annual rate for this semiannual coupon bond?
"There are two annual coupon bonds A & B where A is a 12% coupon bond selling at a premium and B is a 8% bond selling at a discount. Currently the yield to maturity for bonds is 8%. Compute the price of A and B."
I thought as long as ytm = coupon rate, then the price of bond is always selling at par. Then how can bond B selling at a discount?
Also let's say there is a semi annual coupon bond, is the YTM a six month effective rate*2 or is YTM the effective annual rate for this semiannual coupon bond?
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