Assignment: All the examples in section 6.2!
• The premium-discount pricing formula for bonds reads as P = C(g −j)an j + C where C is the redemption amount, g is the modified coupon rate, j is the effective yied rate per coupon period, and n is the number of coupons.
• If P > C, we say that the bond sells at a premium
• The value P −C is called the premium or amount of premium for the bond, i.e.,
P −C = C(g −j)an j • So, the bond sells at a premium iff g > j