You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 9 percent, which is paid semiannually. The yield to maturity on the bonds is 8 percent annual interest. There are 15 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) b. With 10 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par
a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. With 10 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Bonds are fixed-income assets that serve as a representation of investor loans to borrowers (typically corporate or governmental). A bond is analogous to a contract outlining the terms of a loan and the associated payments between a lender and borrower. Corporations, towns, cities, states, and other sovereign governments utilise bonds to finance projects and operations. Bondholders are the issuer's borrowers or creditors. Bond specifications sometimes include the terms for the borrower's variable or fixed interest payments as well as the estimated date by which the loan's principal will be paid back to the bond owner.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
