Ron Rhodes calls the broker to inquire about purchasing a bond of Golden Years C

Question

Ron Rhodes calls the broker to inquire about purchasing a bond of Golden Years Corporation. Hits broker quotes a price of 1,170 dollars. Ron is concerned that bond might be overpriced based on the facts involved. The 1000 dollars par value bond pays 13 percent annual interest coupon rate, and it has 18 years remaining until maturity. The current yield to maturity on similar bonds is 11 percent. Do you think the bond is over priced? show necessary calculations to improve your answer. What if the current yield increases to 12 percent ? what is the new price?

Explanation / Answer

Ron Rhodes calls the broker to inquire about purchasing a bond of Golden Years C

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