P9-13 (similar to) Question Help * (Related to Checkpoint 9.2 and Checkpoint 9.3
ID: 2802328 • Letter: P
Question
P9-13 (similar to) Question Help * (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 16-year, $1,000 par value bonds pay 14 percent interest annually. The market price of the bonds is $940 and the market's required yield to maturity on a comparable-risk bond is 17 percent. a. Compute the bond's yield to maturity b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)Explanation / Answer
a)
b)
c)
Bond is over priced. I will not buy.
1 Face value (FV) $ 1,000 2 Coupon rate 14.00% 3 Number of compounding periods per year 1 1*2/3 Interest per period (PMT) $ 140.00 Bond price (PV) $ (940.00) 4 Number of years to maturity 16 5 = 4*3 Number of compounding periods till maturity (NPER) 16 Bond yield to maturity RATE(NPER,PMT,PV,FV) Bond yield to maturity 15.01%Related Questions
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