Question

Bond valuation​) Bellingham bonds have an annual coupon rate of 9 percent and a par value of $1,000 and will mature in 5 years. If you require a return of 6 ​percent, what price would you be willing to pay for the​ bond? What happens if you pay more for the​ bond? What happens if you pay less for the​ bond?

a. The price you would be willing to pay for the bond is  (Round to the nearest​ cent.)

b. The bond is not an acceptable investment if you pay more for the bond because the expected rate of return for the bond is less than your required rate of return.  ​(Select from the​ drop-down menus.

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

b.

Drop-down menu not provided in question thus unable to provide exact menu to select. However, statement provided in (b) is TRUE.

Please do comment drop down menu if you require further explanation and exact menu to select.