You Wish To Purchase A 20-year, $1,000 Face Value Bond That Makes Semiannual Interest Payments Of $40. If You Require A 10% Nominal Yield To Maturity, What Price Should You Be Willing To Pay For The Bond?


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FYI - Nominal Yield = "the interest rate stated in writing on the face of the bond"... And that rate is based on the bond's par value (i.e. Value at maturity or call... Usually $1,000).    Your question doesn't make sense.  The Nominal Yield is always the written yield of a par valued bond.  If your receiving $80 per year in interest payments then your yield is 8%.    If you want your yield (actual yield not nominal yield) to be 10% you need to pay below par ($800) for the bond.  Then your interest rate would equate to 10%.    That's not going to happen today.  Interest rates are low so bond prices are high - In to day's bond market, only the most risky bonds yield 10%.  You'd be crazy to purchase a bond yielding 10%.

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