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National​ Steel's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price of...

National​ Steel's 15-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $900​, and your required rate of return is 12 percent.

a. Compute the​ bond's expected rate of return.

b. Determine the value of the bond to​ you, given your required rate of return.

c. Should you purchase the​ bond?

Solutions

Expert Solution

a)

Hence, Bond's expected rate of return is 10.34%

2)

Hence, Bond value is $795.67

c)

No, expected return is less than required return.

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jeff jeffy answered 2 days ago
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