A bond of the Telink Corporation pays $110 in annual interest, with a $1,000 par value. The

Question:

A bond of the Telink Corporation pays $110 in annual interest, with a $1,000 par value. The bond matures in 20 years. The market’s required yield to maturity on a comparable-risk bond is 9 percent.

a. Calculate the value of the bond.

b. How does the value change if (i) the market’s required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 6 percent?

c. Interpret your findings in parts a and b.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...