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Question 1 1 pts Company A has 8 percent coupon bonds on the market with 14 years left to maturity. The bonds make annual pay
Question 2 1 pts Firm Z issued 17-year bonds 2 years ago at a coupon rate of 8.61 percent. The bonds make semiannual payments
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Answer #1

1)

YTM = Interest   + (Redemption Value- Market Value)/ Period For Which Bond Issued
(Redemption Value + Market Price)/2
YTM= 80+(1000-1145)/14 years
(1000+1145)/2
YTM = 6.40%
Correct Option: FIRST

2)

Bond Valuation
Face Value 1000
Coupon Rate 0.0861
Discounting Rate 0.0705
Redemption Value 1000
Years To Maturity 15
Coupon Payment Duration Semi-Annually
Computation Of Bond Price
a Semi-annual Interest Amount $                      43.05
($1000*8.61%/2)
b PV Annuity Factor for (30 Years,3.525%) 18.3346
c Present Value Of Annual Interest (a*b) $                   789.30
d Redemption Value $                1,000.00
e PV Factor Of (30 Years,3.525%) 0.35371
g Present Value Of Redemption Amount (d*e) $                   353.71
f Intrinsic Value ( Price ) Of The Bond (c+g) $                1,143.01
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