a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 13 percent or (ii) decreases to 5 percent? c. Interpret your findings in parts a and b.
a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 13 percent or (ii) decreases to 5 percent? c. Interpret your findings in parts a and b.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
(Bond valuation relationships) A bond of Telink Corporation pays
$120
in annual interest, with a
$1,000
par value. The bonds mature in
15
years. The market's required yield to maturity on a comparable-risk bond is
10
percent.a. Calculate the value of the bond.
b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to
13
percent or (ii) decreases to
5
percent?c. Interpret your findings in parts a and
b.
Question content area bottom
Part 1
a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is
10
percent?$enter your response here
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