Question
( Bond valuation ) You own a 20-year, $1,000 par value bond paying 6.5 percent interest annually. The market price of the bond is $900,
(Bond valuation) You own a 20-year, $1,000 par value bond paying 6.5 percent interest annually. The market price of the bond is $900, and your required rate of return is 9 percent.
a. Compute thebond's expected rate of return.
b. Determine the value of the bond toyou, given your required rate of return.
c. Should you sell the bond or continue to ownit?
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Financial Markets and Institutions
Authors: Anthony Saunders, Marcia Cornett
6th edition
9780077641849, 77861663, 77641841, 978-0077861667
