Ron Rhodes calls his broker to inquire about purchasing a bond of Golden Years Recreation Corporation. His broker quotes a price of $1,180. Ron is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 10 percent annual interest payable semiannually, and has 20 years remaining until maturity. The current yield to maturity on similar bonds is 8 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?

• No

• Yes