Question

Dahler Corporation has just issued a bond with a maturity of 20 years, coupon rate of 10.25%, and a market price of $1330.25. Dahler makes semiannual coupon payments.

a) what is the YTM expressed as a quoted rate based on semi-annual compounding? And what is the effective annual YTM on this bond?

b)What is the bond's expected price two years from now? What is its capital gains yield for year 2? What is its current yield at the beginning of year 2? What is the expected total return for year 2?

c) What would happen to the price of the bond over time, as the bond gets closer to maturity? (Again, assuming no change in interest rates)