Question
(Bond valuation) Fingen's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price...
(Bond valuation) Fingen's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $930 and the market's required yield to maturity on a comparable-risk bond is 8 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required rate of return.
c. Should you purchase the bond?
Homework Answers
Answer #1
a)Yield to maturity f the bond is given below by solving in excel
B)Value of the bond
PRice of bond=$1085.99
===========================
C)since market value of bond is less than book value of bond.Investor should purchase the bond
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