Question

eBook o o Yield to Maturity and Required Returns The Brownstone Corporation's bonds have aturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. a. 1. What is the yield to maturity at a current market price of $8357 Round your answer to two decimal places. % 2. What is the yield to maturity at % current market price of $1,122? Round your answer to two decimal places. b. Would you pay $835 for one of these bonds if you thought that the appropriate rate of interest was 13% - that -Select- : Explain your answer. 1. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return. II. You would buy the bond as long as the yield to maturity at this price equals your required rate of return. III. You would buy the bond as long as the yield to maturity at this price does not equal your required rate of return. IV. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return. Select

Answer 1

N 1000 Face value tenure coupon payment Rate Price ON O 100 10% 835 14.28% 1122 7.41% YTM price YTM

formulas used :-

(a)YTM =RATE(D3,D4,-D6,D2)

(b)YTM=RATE(D3,D4,-D8,D2)

yes we will purchase a bond (IV) as long as the YTM is greater than the required rate of return.