Ron Rhodes calls his broker to inquire about purchasing a bond of Golden Years Recreation Corporation. His

Question:

Ron Rhodes calls his broker to inquire about purchasing a bond of Golden Years Recreation Corporation. His broker quotes a price of $1,170. Ron is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 13 percent interest, and it has 18 years remaining until maturity.

The current yield to maturity on similar bonds is 11 percent.

Do you think the bond is overpriced? Do the necessary calculations.

Broker
A broker is someone or something that acts as an intermediary third party, managing transactions between two other entities. A broker is a person or company authorized to buy and sell stocks or other investments. They are the ones responsible for... 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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...