Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%. a. What is the yield to maturity at a current market price of 1. $838? Round your answer to two decimal places. % 2. $1,080? Round your answer to two decimal places. % b. Would you pay $838 for each bond if you thought that a "fair" market interest rate for such bonds was 12%-that is, if rd = 12%? I. You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return. II. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond. III. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return. IV. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return. V. You would buy the bond as long as the yield to maturity at this price equals your required rate of return. -Select- v
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%. a. What is the yield to maturity at a current market price of 1. $838? Round your answer to two decimal places. % 2. $1,080? Round your answer to two decimal places. % b. Would you pay $838 for each bond if you thought that a "fair" market interest rate for such bonds was 12%-that is, if rd = 12%? I. You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return. II. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond. III. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return. IV. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return. V. You would buy the bond as long as the yield to maturity at this price equals your required rate of return. -Select- v
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%.
a. What is the yield to maturity at a current market price of
1. $838? Round your answer to two decimal places.
%
2. $1,080? Round your answer to two decimal places.
%
b. Would you pay $838 for each bond if you thought that a "fair" market interest rate for such bonds was 12%-that is, if rd = 12%?
I. You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return.
II. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond.
III. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.
IV. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.
V. You would buy the bond as long as the yield to maturity at this price equals your required rate of return.
-Select- ✓
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