Question
Problem 5-10 Yield to Maturity and Required Returns The Brownstone Corporation's bonds have 5 years remaining...
Problem 5-10
Yield to Maturity and Required Returns
The Brownstone Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%.
What is the yield to maturity at a current market price of $796? Round your answer to two decimal places.
_____%
What is the yield to maturity at a current market price of $1,067? Round your answer to two decimal places.
_____%
Would you pay $796 for one of these bonds if you thought that the appropriate rate of interest was 12% - that is, if rd = 12%.
Homework Answers
Answer #1
a)
Hence, YTM at $796 price is 13.93%
b)
Hence, YTM at $1,067 price is 6.39%
c)
Yes i will pay $796 is the rd = 12%
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