Question
. Questions 14 16 utilize related information. Move forward in time from the story told in questions 14 and 15. Recall that the investor bought
. Questions 14 16 utilize related information. Move forward in time from the story told in questions 14 and 15. Recall that the investor bought the Redwood Rest Homes, Inc. bond for $955 three years after it was originally issued. Now, seventeen years after it was issued, the holder decides to sell the bond for its new market price of $938. (We can assume that interest rates have risen slightly and steadily over the years since the original issue date, such that the company has had no motivation to call the bonds.) QUESTION: PLEASE REFER TO THE ATTACHMENT TO QUESTION 16 IN ANSWERING. Which of the five equations shown would you use in computing the bond holders (14-year) HOLDING PERIOD YIELD?
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- A. Equation 1
- B. Equation 2
- C. Equation 3
- D. Equation 4
- E. Equation 5
In answering question 14 on Part 2 of the exam, Which equation would you use in computing the bond holder's yield to maturity, please refer to the following five equations. 70 a. EQUATION 1: $955 = $42 + $1,000 70 b. EQUATION 2: $1,000 = $21 + $955 c. EQUATION 3: $955 = $21 (-) )" (44) () (4-47) +$1,042(122) * (47) (****1.0 (37)" 32 d. EQUATION 4: $1,955 = $21 + $1,000 1+r e. EQUATION 5: $955 = $21
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