Check my work 1 Applied Software has a $1,000 par value bond outstanding that pays 13 percent interest with annual payments. The current yield to maturity on such bonds in the market is 11 percent. Use Appendix B and Appendix D. 12.5 points Compute the price of the bonds for these maturity dates: (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) eBook Price of the bond $ Print a. 25 years b. 19 years c. 5 years $ $ References Check my work View previous attempt 2 Ron Rhodes calls his broker to inquire about purchasing a bond of Golden Years Recreation Corporation. His broker quotes a price of $1,160. Ron is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 12 percent annual interest payable semiannually, and has 20 years remaining until maturity. The current yield to maturity on similar bonds is 8 percent. 12.5 points a. Compute the new price of the bond. Use Appendix B and Appendix D. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to 2 decimal places.) eBook New price of the bond Print References b. Do you think the bond is overpriced? No O Yes Check my 3 Martin Shipping Lines issued bonds ten years ago at $1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 9 percent. This return was in line with required returns by bondholders at that point, as described below: 12.5 points Real rate of return Inflation premium Risk premium 5% 4 2 eBook Total return 11% Print References Assume that today the inflation premium is only 1 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. Compute the new price of the bond. Use Appendix B and Appendix D. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to 2 decimal places.) New price of the bond 4 Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 8 percent annual interest and has 15 years remaining to maturity. The current yield to maturity on similar bonds is 14 percent. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) 12.5 points a. What is the current price of the bonds? Use Appendix B and Appendix D. eBook Current price $ Print b. By what percent will the price of the bonds increase between now and maturity? References Price increases by % c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate %