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4. AT&T 10-year bonds paying 8% currently sells for 0.96 which us paying 8% currently sells for 0.96 which is equivalent to $

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Answer #1

a.

current yield

=(1000*8%)/960

=8.33%

b.

yield to maturity using excel function

=RATE(nper,pmt,pv,fv)

=RATE(10,1000*8%,-960,1000)

=8.61%

c.

investor price using excel function

=PV(rate,nper,pmt,fv)

=PV(9%,10,-1000*8%,-1000)

=935.82

d.

She should not invest because the price of 960 is higher than the investor price of 935.82

the above is answer..

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