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Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 8 percent annual interest and has 16 years remaining to maturity. The current yield to maturity on similar bonds is 14 percent. (Use a Financial calculator to arrive at the answers. Do not round intermediase calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Current price $ b. By what percent will the price of the bonds increase between now and maturity? Price increases by % c. What is the annual compound rate of growth in the value of the bonds? Annual compound rate %
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