3. (20 points) You are evaluating a bond for possible investment. The coupon is 8.5%, the...
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3. (20 points) You are evaluating a bond for possible investment. The coupon is 8.5%, the maturity is 16 years, and the coupon is paid semiannually. The YTM for the bond is 9.2%, and the par value is $1000. a. What is your estimate of the value of the bond? b. If you could reinvest coupons at 10.2%, what is your estimate of the horizon return? 3. (20 points) You are evaluating a bond for possible investment. The coupon is 8.5%, the maturity is 16 years, and the coupon is paid semiannually. The YTM for the bond is 9.2%, and the par value is $1000. a. What is your estimate of the value of the bond? b. If you could reinvest coupons at 10.2%, what is your estimate of the horizon return?
Expert Answer:
Answer rating: 100% (QA)
To estimate the value of the bond we can use the present value formula The present value of a bond can be calculated by discounting the future cash fl... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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