Stanley, Inc. issues 20-year $1,000 bonds that pay $80 annually. The market price for the bonds is $909. The market's required yield to maturity on a comparable-risk bond is 9 percent. 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 12 percent or (ii) decreases to 7 percent? c. Under which of the circumstances in part b should you purchase the bond
Stanley, Inc. issues 20-year $1,000 bonds that pay $80 annually. The market price for the bonds is $909. The market's required yield to maturity on a comparable-risk bond is 9 percent. 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 12 percent or (ii) decreases to 7 percent? c. Under which of the circumstances in part b should you purchase the bond
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...
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Stanley, Inc. issues 20-year $1,000 bonds that pay $80 annually. The market price for the bonds is $909. The market's required yield to maturity on a comparable-risk bond is 9 percent.
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 12 percent or (ii) decreases to 7 percent?
c. Under which of the circumstances in part b should you purchase the bond?
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