Question

A bond of the Telink Corporation pays $110 in annual interest, with a $1,000 par value. The bond matures in 20 years. The market’s required yield to maturity on a comparable-risk bond is 9 percent.
a. Calculate the value of the bond.
b. How does the value change if (i) the market’s required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 6 percent?
c. Interpret your findings in parts a and b.



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  • CreatedOctober 31, 2014
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