Assume it is early 2003 and the following bond quotations appeared in the wall street journal: using chart?

Question

(Cop) 5.900 Oct 15,2032 95.972 6.200 90 30 88,510

(AHC) 7.125 Mar 15,2033 100.145 7.113 179 30 55,000

1)How much in annual interest payment would an investor in each of these bonds receive?

2)How much would you have to pay to buy one COP bond at the last price shown?

3)why do you think the yield to maturity on the AHC bond is higher than the yield to maturity on the COP bond?

Answer 1

1:

COP = $59.00 per $1,000 face value

AHC = $71.25 per $1,000 face value

2:  

$959.72

3:  

Even though the price for the AHC bond is higher, it pays

1.225% more per year for 30 years, more than covering

the price spread. Therefore, the YTM for the AHC bond

is higher.