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 13 percent, which is paid semiannually. The yield to maturity on the bonds is 8 percent annual interest. There are 10 years to maturity.
a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. With 5 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
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