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( Bond valuation ) National Steel's 1 5 - year, $ 1 , 0 0 0 par value bonds pay 1 2 percent interest annually.
Bond valuation National Steel's year, $ par value bonds pay percent interest annually. The market price of the bonds is $ and your required rate of return is percent.
a Compute the bond's expected rate of return.
b Determine the value of the bond to you, given your required rate of return.
c Should you purchase the bond?
a What is the expected rate of return of the bond?
Round to two decimal places.
b What is the value of the bond to you, given your percent required rate of return?
Round to the nearest cent.
c Should you purchase the bond? Select the best choice below.
A Yes. Since the expected rate of return is more than your required rate of return, the bond is an acceptable investment.
B No Since the expected rate of return is less than your required rate of return, the bond is not an acceptable investment.
C Yes. Since the expected rate of return is less than your required rate of return, the bond is an acceptable investment.
D No Since the expected rate of return is more than your required rate of return, the bond is not an acceptable investment.
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