A 12-year annual payment corporate bond has a market price of $925. It pays annual interest...
| A 12-year annual payment corporate bond has a market price of $925. It pays annual interest of $60 and its required rate of return is 7 percent. | |||||||||||||||||||
| By how much is the bond mispriced? | |||||||||||||||||||
|
-1.51% |
||
|
-1.26% |
||
|
-1.01% |
||
|
-0.76% |
||
|
-0.51% |
||
|
-0.26% |
||
|
-0.01% |
||
|
0.24% |
||
|
0.48% |
Homework Answers
rate positively ..
| Computation of should be price | |||
| put in calculator | |||
| FV | 1000 | ||
| PMT | 60 | ||
| I | 7% | ||
| N | 12 | ||
| Compute PV | ($920.57) | ||
| Price = | $920.57 | ||
| Current price = | 925 | ||
| Mis priced = | 0.48% | ||
| 925/920.57-1 | |||
| ans= | 0.48% |
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