(Bond valuation) Fingen's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price...

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(Bond valuation) Fingen's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price...

(Bond valuation) Fingen's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $930 and the market's required yield to maturity on a comparable-risk bond is 8 percent.

a. Compute the bond's yield to maturity.

b. Determine the value of the bond to you, given your required rate of return.

c. Should you purchase the bond?

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Answer 1

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Answer #1

a) a)Yield to maturity f the bond is given below by solving in excel

fx RATE(C4;C3;-C5;C1) A C Face value of bond 1000 1 9.00% coupon rate 2 Annual coupon payment 90 3 year remining for maturity

B)Value of the bond

A Face value of bond $1,000.00 9.00% coupon rate 2 Annual coupon payment $90.00 year remining for maturity current market pri

Price of bond=$1085.99

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C)since market value of bond is less than book value of bond.Investor should purchase the bond

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Answer 2

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