Compute the new price of the bond and comment

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Reference no: EM13305944

Jim Busby calls his broker to inquire about purchasing a bondof Disk Storage Systems. His broker quotes a price of$1,180. Jim is concerned that the bond might be overpricedbased on the facts involved. The $1,000 par value bond pays14 percent interest, and it has 25 years remaining untilmaturity. The current yield to maturity on similar bonds is 12 percent. Compute the new price of the bond and comment on whether you think it is overpriced in the market place.

Reference no: EM13305944

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