Find the value of the bond when the required return

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(a) An investor wants to know the YTM on an 8-year, 7% bond selling for 88.95% of its par value before investing in it. The par value is $1,000. What is the bond's YTM, using the approximation formula?

(b) Lahey Industries has outstanding a $1,000 par-value bond with an 8 percent coupon interest rate. The bond has 12 years remaining to its maturity date.

Required:

(a) If interest is paid annually, find the value of the bond when the required return is (i) 7%, (ii) 8%, and (iii) 10%.

(b) Indicate for each case in part a whether the bond is selling at a discount, at a premium, or at its par value.

Reference no: EM132516383

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