7. (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen\'s 12-

Question

7. (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 12-year. $1,000 par value bonds pay 8 percent interest annually. The market price of the bonds is $900 and the market's required yield to maturity on a comparable-risk bond is 11 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return, c. Should you purchase the bond? a. What is your yield lo maturity on the Fingen bonds given the market price of the bonds? [ ]. (Round to two decimal places.) b. What should be the value of the Fingen bonds given your required rate of return on a comparable-bond? [ ] (Round to the nearest cent.) e. You [ ] purchase the Fingen bands because they are currently (Select from the drop-down menus ) (Related to Checkpoint 9.2) (Yield to maturity) Abner Corporation's bonds mature in 24 years and pay 15 percent interest annually. It you purchase the bonds for $850, what is your yield to maturity? Your yield to maturity on the Abner bands is [1%. (Round to two decimal places.)

Explanation / Answer

7)

a)

b)

c)

I should not purchase the bond, Bond is over priced.

Face value (FV) $                                    1,000.00 Coupon rate 8.00% Number of compounding periods per year 1 Interest per period (PMT)                                              80.00 Bond price (PV) $                                     (900.00) Number of years to maturity 12 Number of compounding periods till maturity (NPER) 12 Bond Yield to maturity RATE(NPER,PMT,PV,FV) Bond Yield to maturity 9.43% RATE(12,80,-900,1000)

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