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Suppose the current YTM for the floating rate coupon bond is 4% pa. If the floating coupon bond pays coupon semi-annually, what is the price of this bond if today is the issuance date A. $98 B. Par value C. Price can’t be calculated because maturity and coupon rate are not given D. $102

Question

Suppose the current YTM for the floating rate coupon bond is 4% pa. If the floating coupon bond pays coupon semi-annually, what is the price of this bond if today is the issuance date A. 98B.ParvalueC.PricecantbecalculatedbecausematurityandcouponratearenotgivenD.98 B. Par value C. Price can’t be calculated because maturity and coupon rate are not given D. 102

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Solution

The answer is C. Price can’t be calculated because maturity and coupon rate are not given.

To calculate the price of a bond, you need to know the bond's maturity date and the coupon rate, in addition to the yield to maturity (YTM). The maturity date is when the bond's principal will be repaid, and the coupon rate is the interest rate that the bond issuer will pay to the bondholder. Without these two pieces of information, it's impossible to calculate the bond's price.

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