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Stanley, Inc. issues 15-year $1000 bonds that pay $85 annually. The market price for the bonds...

Stanley, Inc. issues 15-year $1000 bonds that pay $85 annually. The market price for the bonds is $960. The market's required yield to maturity on a comparable-risk bond is 9%.

A. What is the value of the bond to you?

B. What happens to the value if the market's required yield to maturity on a comparable-risk bond (i) increases to 11 percent or (ii) decreases to 7%?

C. Under which of the circumstances in part b should you purchase the bond?

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Answer #1

So the bond should only be purchasable when the YTM has decreased to 7%

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