Question
You are called in as a financial analyst to appraise the bonds of Olsens Clothing Stores. The $1,000 par value bonds have a quoted annual
You are called in as a financial analyst to appraise the bonds of Olsens Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 9 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 20 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. Compute the price of the bonds based on semiannual analysis.
Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.
bond price =
b. With 15 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds?
Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.
new bond price =
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