Question

You own a 15​-year, ​$ 1,000 par value bond paying 7.5 percent interest annually. The market price of the bond is ​$ 900​, and your required rate of return is 10 percent. a. Compute the​ bond's expected rate of return. b. Determine the value of the bond to​ you, given your required rate of return. c. Should you sell the bond or continue to own​ it? a. What is the expected rate of return of the 15​-year, ​$ 1,000 par value bond paying 7.5 percent interest annually if its market price is ​$ 900​? nothing ​% ​(Round to two decimal​ places.)

Answer 1

a)

b)

c)Sell the bond, since the bond is overpriced.