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fyi bonds have a par value of $1,000. the bonds pay $40 in interest every six months and will mature in 10 years. a. calculate the price if the yield to maturity on the bonds is 7, 8, and 9 percent, respectively. b. explain the impact on price if the required rate of return decreases. c. compute the coupon rate on the bonds. how does the relationship between the coupon rate and the yield to maturity determine how a bond's price will compare to it par value?

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When a bond's YTM is higher than its coupon rate, it will be sold for less (below par value). When the bond matures, the investor will receive its par value despite paying less than it is worth.

What is par value?

  • The investor's return increases above the coupon rate due to this inherent benefit. A bond will be sold for its par value if the coupon rate and YTM are equal.
  • A bond's par value will be exceeded by the investor if the YTM is less than the coupon rate and the coupons are therefore attractive.

a. 7% YTM price = $1071.06

8% YTM price = $1000.00

9% YTM price = $934.96

b. The price of the bond will increase.

c. Coupon rate = ($40 × 2)/$1000 = 8%

  • Par value is also known as stated value or face value in the financial and accounting fields.
  • At par, over par, and under par are terms that result from this. Par value refers to a corporation's charter-determined value for a single common share. The actual worth of the shares is often unrelated to it.
  • It is frequently lower in reality. Any stock certificate generated for shares acquired displays the par value. An organisation can specify a par value or not when authorising shares.

To learn more about par value refer to:

https://brainly.com/question/25765493

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