Question
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
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%.
a. What is the yield to maturity at a current market price of
1. $898? Round your answer to two decimal places.
2. $1,103? Round your answer to two decimal places.
b. Would you pay $898 for each bond if you thought that a "fair" market interest rate for such bonds was 12%—that is, if rd = 12%?
Homework Answers
Answer #1
a)
1)
2)
b)
Yes i will pay $898. YTM is greater than market interest rate.
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