(Bond

valuation)

You own a

15-year,

$1,000

par value bond paying

6.5

percent interest annually. The market price of the bond is

$850,

and your required rate of return is

10

percent.

a. Compute the bond's expected rate of return.

b. Determine the value of the bond to you, given your required rate of return.

c. Should you sell the bond or continue to own it?

a. What is the expected rate of return of the

15-year,

$1,000

par value bond paying

6.5

percent interest annually if its market price is

$850?

nothing%

(Round to two decimal places.)