How much should you be willing to pay for the bond

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Reference no: EM132062838

Bond valuation

1. You are considering a 30-year, $1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 8.6%, how much should you be willing to pay for the bond? Do not round intermediate steps. Round your answer to the nearest cent.

Yield to maturity

Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.

2. What is the yield to maturity at a current market price of

a. $894? Round your answer to two decimal places.

b. $1,121? Round your answer to two decimal places.

c. Would you pay $894 for each bond if you thought that a "fair" market interest rate for such bonds was 13%-that is, if rd = 13%?

-You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

-You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.

-You would buy the bond as long as the yield to maturity at this price equals your required rate of return.

-You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

-You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond.

Reference no: EM132062838

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