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Fingen's 15​-year, ​$1,000 par value bonds pay 12 percent interest annually. The market price of the... Fingen's 15​-year, ​$1,000 par value bonds pay 12 percent interest annually. The market price of the bonds is ​$1,100 and the​ market's required yield to maturity on a​ comparable-risk bond is 9 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? Solutions Expert Solution  a) YTM is that discount rate which equates the cash flows from the bond with the price of$1100 if it is held for 15 years, its maturity. The cash flows are the maturity value of $1000 at EOY 15 and the annual interest of$120 for 15 years. The relevant half yearly discount rate has to be found by trial and error, so that the PV of the expected cash flows equals the price of the bond. Discounting with 11%: Price = 1000/1.11^15+120*(1.11^15-1)/(0.11*1.11^15) = $1,071.91 Discounting with 10%: Price = 1000/1.10^15+120*(1.10^15-1)/(0.10*1.10^15) =$     1,152.12 So, the YTM lies between 8% and 9%. By simple interpolation YTM = 10%+1%*(1152.12-1100)/(1152.12-1071.91) = 10.65% Using an online calculator, YTM = 10.64% b) Value of the bond with 9% RRR = = 1000/1.09^15+120*(1.09^15-1)/(0.09*1.09^15) = $1,241.82 c) The bond can be purchased as it is underpriced in the market. If purchased it will yield 10.65% and agains the required yield of 9%. Related Solutions ​Fingen's 12​-year, ​$1,000 par value bonds pay 15 percent interest annually. The market price of the...
​Fingen's 12​-year, ​$1,000 par value bonds pay 15 percent interest annually. The market price of the bonds is ​$880 and the​ market's required yield to maturity on a​ comparable-risk bond is 16 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?
Fingen's 15​-year, ​$1,000 par value bonds pay 11 percent interest annually. The market price of the bonds... Fingen's 15​-year, ​$1,000  par value bonds pay 11 percent interest annually. The market price of the bonds is ​$920 and the​ market's required yield to maturity on a​ comparable-risk bond is 14 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? ​Fingen's 13​-year, ​$1,000 par value bonds pay 9 percent interest annually. The market price of the...
​Fingen's 13​-year, ​$1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is ​$850 and the​ market's required yield to maturity on a​ comparable-risk bond is 10 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?
(Bond valuation)?Fingen's 14?-year, ?$1,000 par value bonds pay 13 percent interest annually. The market price of... (Bond valuation)?Fingen's 14?-year, ?$1,000 par value bonds pay 13 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 14 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?... ​(Bond valuation) ​Fingen's 16​-year,$1,000 par value bonds pay 14 percent interest annually. The market price...
​(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? a.  What is your yield to maturity on the Fingen bonds given the market price of the​...
The 12-year, $1,000 par value bonds of Smith Industries pay 7 percent interest annually. The market... The 12-year,$1,000 par value bonds of Smith Industries pay 7 percent interest annually. The market price of the bond is $885, and the market’s required yield to maturity on a​ comparable-risk bond is 10 percent. What is your yield to maturity on the Smith bonds given the current market price of the​ bonds? Round to two decimal places. What should be the value of the Smith bonds given the​ market's required yield to maturity on a​comparable-risk bond? Round to... ExxonMobil ​12 year bonds pay 9 percent interest annually on a ​$1,000 par value. If the...
ExxonMobil ​12 year bonds pay 9 percent interest annually on a ​$1,000 par value. If the bonds sell at$775 what is the​ bonds' expected rate of​ return? The​ bonds' expected rate of return is ?
7) Part 1. (Bond valuation)Fingen's 19?-year, ?$1,000 par value bonds pay 13 percent interest annually. The... 7) Part 1. (Bond valuation)Fingen's 19?-year, ?$1,000 par value bonds pay 13 percent interest annually. The market price of the bonds is ?$1,100 and the? market's required yield to maturity on a? comparable-risk bond is 10 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? Part 2. (Yield to? maturity) Abner? Corporation's bonds mature in 19 years and pay 11... The 12​-year, ​$1,000 par value bonds of Waco Industries pay 12percent interest annually. The market...
The 12-year, $1,000 par value bonds of Waco Industries pay 12 percent interest annually. The market price of the bond is$1,135, and the market's required yield to maturity on a comparable-risk bond is 9 percent. Compute the bond's yield to maturity.1.  Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.