Bond Valuation.
What if Mark’s Treasury bond in the previous problem had a coupon rate of 9% and new bonds still had interest rates of 8%? For what price should Mark sell the bond in this situation?
2. Risk Premium. Sandy has a choice between purchasing $5,000 in Treasury bonds paying 7% interest or purchasing $5,000 in BB-rated corporate bonds with a coupon rate of 9.2%. What is the risk premium on the BB-rated corporate bonds?