Question

Problem /-/ Fix-It Inc. recently issued 10-year, $1000 par value bonds at an 10% coupon rate. Assume bond coupons are paid semiannually. Round PVFA and PVF values in intermediate calculations to four decimal places. Do not round other intermediate calculations. a. Two years later, similar bonds are yielding investors 6%. At what price are Fix-Its bonds selling? Round the answer to the nearest cent. b. What would the bonds be selling for if yields had risen to 12%? Round the answer to the nearest cent. c. Assume the conditions in part a. Further assume interest rates remain at 6% for the next 8 years. Find the price of the Fix-It bonds at the end of year 10. Round the answer to the nearest cent.

Answer 1

Ginen Time o 10x2:20 Bond's Parvalue (Ev): 1000 Coupon rate : 10%. Pmt - 1000x101'. 50 a) Two years later the bonds gield at 6% P ve pul OL, 20, -50, 4000,0) 81297.55 b) If the yield is rises to 127. then the selling price is Pita Patel PU2 Pu (12%, 20,-50,-1000,0) :8885130 =). At the end of the oth year, the Rix-it bonds approaches maturity, then the price will be equal to 1000 parvalue.