Hastings Motors has bonds outstanding with 12 years left until maturity. The bonds have a $1,000 par value and an 8 percent annual coupon. Currently, the bonds sell at a price of $1,025.
What is the annual coupon bond’s yield to maturity?
a. 7.67%
b. 7.80%
c. 8.00%
d. 8.13%
e. 8.33%
Answer: A
What will be the percentage increase in the annual coupon bond’s price if the yield to maturity were to immediately fall by one percentage point (100 basis points)?
a. 5.7%
b. 6.0%
c. 6.9%
d. 7.7%
e. 8.0%
Answer: E
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