Compute price of bonds based on semiannual analysis

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Reference no: EM131583317

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 13 percent, which is paid semiannually. The yield to maturity on the bonds is 8 percent annual interest. There are 10 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Compute the price of the bonds based on semiannual analysis.

b. With 5 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds?

Reference no: EM131583317

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