What is the current market value

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Lyn bought a bond that was issued by Super Striker(SS) five years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled for six months from today.

a. If the yield on similar risk investments is 11 percent, what is the current market value (price) of the bond?

b. Compute the capital gains yield, current yield, and total yield that Lyn will earn if she holds the bond until it matures. Assume that the market rate does not change from now until maturity.

c. Suppose that Lyn decides she wants to sell the bond seven years from today when 10 years remain until maturity. If the market rate is 8 percent at the time she sells the bond in seven years, for what price will Lyn be able to sell the bond? Compute the capital gains yield, current yield, and total yield that the new investor will earn if he or she holds the bond until it matures 10 years later. Assume that the market rate does not change from the time Lyn sells the bond until it matures.

Reference no: EM131412410

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