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Please note that there is something missing in your question. How many years to maturity does the bond have?
You cannot calculate the price f the bond without knowing the years to maturity so if the question does not offer more information, then this is a mistake. Please double check with your instructor.
Which textbook are you using: Title, author's name, and edition?
Fundamentals of Corporate Finance 5th ed.
Brealey, Myers, Marcus. 2007
The MCGraw-Hill Companies
There is another question after this one,
Bond Pricing. A 6-year circular file bond pays interest of $80 annually and sells for $950. What are its coupon rate , current yield and yield to maturity?
I can yes, I am checking if I have your book. Let me first check the first question
Ok :) My mistake, I misread the first question.
To make up for my mistake, I will answer both questions for the price of one.
Please click here for the solutions
P.S. If you like my work, please feel free to address your future posts to me secifically by typing "For BusinessTutor" at the beginning of your post
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If you are up for it I have one more question
Bond Prices and yields. Several years ago, Castles in the Sand, Inc. issued bonds at face value at a yield to maturity of 7% Now with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?
Suppose that investors believe that Castles can make good on the promised coupon payments, but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80 percent of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive?
I am sorry I was working on another assignment.
I can hep with this one, but for future questions, please post each question as a separate post so that there is no confusion about which questions were answered and which were not. Just give me 15 minutes max and I will post the solution.
I will do that
You are welcome
Please click here for the word file
Please click here for the excel sheet
P.S. I have answered the question in excel as well so that you have the two methods (The formula in word, and the excel built-in formulae)