Question: The Severn Company s bonds have four years remaining to maturity

The Severn Company’s bonds have four years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9 percent.
a. Compute the yield to maturity for the bonds if the current market price is
(1) $829
(2) $1,104.
b. Would you pay $829 for one of these bonds if you thought that the appropriate rate of interest was 12 percent—that is, if rd 12%? Explain your answer.

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  • CreatedNovember 24, 2014
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