Question

eBook Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a Coupon rate of 9%. a. What is the yield to maturity.at a current market price of 1. $8077 Round your answer to two decimal places. I 2. $1,1497 Round your answer to two decimal places. b. Would you pay $807 for each bond if you thought that a fair market interest rate for such bonds was 14 %-that is, if re 14 % I You would not buy the bond as long as the vield to maturity at this price is greater than vour reguired rate of return, I1. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond IIL. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return IV. You would buy the band as long as the yield to maturity at this price is iess than your required rate of return. V. You would buy the bond as long as tbe yield to maturity at this price equals vour required rate of return

Answer 1

А в Par Value Coupon rate Years to Maturity $1,000 9% 5 ham to a) Current price YTM $807 14.72% 8 b) Current price YTM $1,149 5.51%

А Hm B Par Value Coupon rate Years to Maturity 1000 0.09 a) Current price YTM 807 =RATE(C3, C2*C1,-C5,C1) 5 6 7 8 9 b) Current price YTM 1149 =RATE(C3,C2*C1,-C8,c1)

Answer c - Option III.

At $807, YTM of bond (14.72%) is greater than required rate of return (14%)