Stanley, Inc. issues a 15-year $1,000 bond that pays $85 annually. The market price for the bond
Question:
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?
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For 
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin
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