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(Bond valuation relationships) A bond of Visador Corporation pays $90 in annual interest, with a $1,000 par value. The bonds mature in 15 years. The
(Bond valuation relationships) A bond of Visador Corporation pays $90 in annual interest, with a $1,000 par value. The bonds mature in 15 years. The market's required yield maturity on a comparable-risk bond is 7.5 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (l) increases to 13 percent or (ii) decreases to 5 percent? c. Interpret your finding in parts a and b a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 7.5 percent? $(Round to the nearest cent) b. (1) What is the value of the bond if the market's required yield to maturity on a comparable-risk bond increases to 13 percent? $(Round to the nearest cent.) b. (ii) What is the value of the bond if the market's required yield to maturity on a comparable-risk bond decreases to 5 percent? $(Round to the nearest cent) Interest rates (the yield to maturity) will cause the value of a bond to Vi by c. The change in the value of a bond caused by changing interest rates is called Interest-rate risk. Based on the answers in part b, a decrease contrast, an increase interest rates will cause the value to . (Select from the drop-down menus.) Also, based on the answers in part b. if the yield to maturity (current interest rate): equals the coupon interest rate, the bond will sell at exceeds the bond's coupon rate, the bond will sell at is less than the bond's coupon rate, the bond will sell at and V. (Select from the drop-down menus.)
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