Computation of present value of bond

Reference no: EM1316250

Computation of present value of bond to check whether it is overpriced.

Ron Rhodes calles his broker to inquire about purchasing a bond of Golden Years Recreation Corporation. His broker quotes a price of $1,170. Ron is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 13% interest and it has 18 years remaining until maturity. The current yield to maturity on similar bonds is 11 percent. Do you think the bond is overprice? Do the necessary calculations.

Reference no: EM1316250

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