Answer questions A-C. For question C, please explain your answer. thanks! Homewo
ID: 2618111 • Letter: A
Question
Answer questions A-C. For question C, please explain your answer. thanks!
Homework: 7-1 MyFinanceLab Assignment Save Score: 0 of 4 pts 7 of 12 (6 complete) HW Score: 36%, 18 of 50 pts P9-13 (similar to) Question Help Related to Checkpoint 92 and Checkpoint 9.3) (Bond valuation) $1,000 par value $940 and the market's required yield to maturity on a comparable-risk bond is 14 percent ) (Bond valuation) Fingen's 14 year, $1,000 par value bonds pay 12 percent interest annually. The market price of the bonds is a. Compute the bond's yield to maturity b. Determine the value of the bond to you, given your required rate of return c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? 1% (Round to two decimal places) Enter your answer in the answer box and then click Check Answer. parts Clear Al 43 PM ype here to search ecExplanation / Answer
a. YTM = 12.95%
Using financial calculator BA II Plus - Input details:
#
FV = Future value =
-$1,000.00
PV = Present Value or Price of the bond =
$940.00
N = Total number of coupon periods =
14
PMT = Coupon Payment =
-$120.00
CPT > I/Y = Rate or yield =
12.95
Convert Rate in % form = I/Y /100 =
12.95%
b. Value of bond = $879.96
Using financial calculator BA II Plus - Input details:
#
FV = Future Value or Face Value =
-$1,000.00
I/Y = Yield = Rate (R) =
14
N = Total number of coupon periods =
14
PMT = Coupon Payment =
-$120.00
CPT > PV = Present Value or Price of the bond =
$879.96
c. No, don’t purchase
We should not purchase the bond because the required yield or interest rate suggests the calculated price $879.96 of bond lower than market price of $940.
We should not purchase the given bond at market price.
Using financial calculator BA II Plus - Input details:
#
FV = Future value =
-$1,000.00
PV = Present Value or Price of the bond =
$940.00
N = Total number of coupon periods =
14
PMT = Coupon Payment =
-$120.00
CPT > I/Y = Rate or yield =
12.95
Convert Rate in % form = I/Y /100 =
12.95%