Question
Amanda called her broker to inquire about purchasing a bond of Richmond co. Her broker Adam quotes a price of $1,170. Amanda is concerned that
Amanda called her broker to inquire about purchasing a bond of Richmond co. Her broker Adam quotes a price of $1,170. Amanda is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 15% annual interest payable semiannually and has 15 years remaining until maturity. The current yield to maturity on similar bonds is 14%.
a. Compute the new price of the bond, don't round intermediate calculations, and round the final answer to 2 decimal places.
The new price of the bond is __ $
b. Do you think the bond is overpriced? yes or no?
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