Sun Devil Savings has just purchased bonds for $38 million that have a par value of $40 million, five years remaining to maturity, and a coupon rate of 12 percent It expects the required rate of return on these bonds to be 10 percent two years from now a At what price could Sun Devil Savings sell t...

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Sun Devil Savings has just purchased bonds for $38 million that have a par value of $40

Question:

Sun Devil Savings has just purchased bonds for $38 million that have a of $40 million, five years remaining to maturity, and a rate of 12 percent. It expects the required rate of return on these bonds to be 10 percent two years from now.
a. At what price could Sun Devil Savings sell these bonds for two years from now?
b. What is the expected annualized yield on the bonds over the next two years, assuming they are to be sold in two years?
c. If the anticipated required rate of return of 10 percent in two years is overestimated, how would the actual selling price differ from the forecasted price? How would the actual annualized yield over the next two years differ from the forecasted yield?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...