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The market price is $850 for a 10​-year bond ($1,000 par​ value) that pays 9 percent...

  1. The market price is $850 for a 10​-year bond ($1,000 par​ value) that pays 9 percent annual​ interest but makes interest payments on a semiannual basis (4.5 percent​ semiannually). What is the​ bond's yield to​ maturity?

The​ bond's yield to maturity is ____​ (Round to two decimal​ places.)

2. (Bond valuation)​Fingen's 16​-year, $1,000 par value bonds pay 14 percent interest annually. The market price of the bonds is $870 and the​ market's required yield to maturity on a​ comparable-risk bond is 15 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?

1)   What is your yield to maturity on the Fingen bonds given the market price of the​ bonds? _______ %       (Round to two decimal​ places.)

--> You should not OR should not purchase the Fingen bonds because they are currently overpriced OR underpriced.

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jeff jeffy answered 2 years ago
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