Question: Stanley, Inc. issues a 15-year $1,000 bond that pays $85 annually. The market price for the bond is $960. The markets required yield to maturity

Stanley, Inc. issues a 15-year $1,000 bond that pays $85 annually. The market price for the bond is $960. The market’s required yield to maturity on a comparable-risk bond is 9 percent.

a. What is the value of the bond to you?

b. What happens to the value if the market’s required yield to maturity on a comparable-risk bond (i) increases to 11 percent or (ii) decreases to 7 percent?

c. Under which of the circumstances in part b should you purchase the bond?

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