Question
A bond with a face value of $ 1,000, 10% annual interest and 20 years maturity is sold for $ 860. a) Calculate the current
A bond with a face value of $ 1,000, 10% annual interest and 20 years maturity is sold for $ 860. a) Calculate the current yield. b) Calculate the yield to maturity. c) At what price would you buy this bond if you want to earn 15% from this investment? d) How would the price of this bond change after 15 years, if the interest rate of return on bonds comparable to it would be 15%? e) At what price would you buy this bond if you want to earn 10% from this investment? f) How would the price of this bond change after 15 years, if the interest rate return on bonds comparable to it would be 10%?
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