jus calls her broker to inquire about purchasing a bond of AFG Company. The broker quotes a price of $1,130. jus is concerned that the bond might be overpriced. The $1,000 par value bond pays 13 percent annual interest payable semiannually, and has 10 years remaining until maturity. The current yield to maturity on similar bonds is 12 percent.

a. Compute the new price of the bond. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

New price of the bond = $______

b. Do you think the bond is overpriced?

multiple choice

No

Yes