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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 10 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 25 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.) Bond price b. With 20 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) New bond price

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 10 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 25 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.) Bond price b. With 20 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) New bond price

Essentials Of Investments
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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### Financial Analysis: Bond Pricing You are tasked as a financial analyst to evaluate the bonds of Olsen’s Clothing Stores. The specifics of these bonds are as follows: - **Par Value**: $1,000 - **Quoted Annual Interest Rate**: 10%, with payments made semiannually - **Yield to Maturity**: 12% annual interest - **Maturity Period**: 25 years For reference, utilize Appendix B and Appendix D for an approximate calculation, but your final answer must be determined using the formula and financial calculator methods. #### Questions a. **Compute the price of the bonds based on semiannual analysis.** - Ensure that the intermediate calculations are not rounded. - Round your final answer to two decimal places. **Input Box:** Bond price b. **With 20 years to maturity, if the yield to maturity decreases significantly to 8 percent, determine the new bond price.** - Do not round the intermediate calculations. - Round your final answer to two decimal places. **Input Box:** New bond price *Note: There are no graphs or diagrams in the provided material.*
Transcribed Image Text:### Financial Analysis: Bond Pricing You are tasked as a financial analyst to evaluate the bonds of Olsen’s Clothing Stores. The specifics of these bonds are as follows: - **Par Value**: $1,000 - **Quoted Annual Interest Rate**: 10%, with payments made semiannually - **Yield to Maturity**: 12% annual interest - **Maturity Period**: 25 years For reference, utilize Appendix B and Appendix D for an approximate calculation, but your final answer must be determined using the formula and financial calculator methods. #### Questions a. **Compute the price of the bonds based on semiannual analysis.** - Ensure that the intermediate calculations are not rounded. - Round your final answer to two decimal places. **Input Box:** Bond price b. **With 20 years to maturity, if the yield to maturity decreases significantly to 8 percent, determine the new bond price.** - Do not round the intermediate calculations. - Round your final answer to two decimal places. **Input Box:** New bond price *Note: There are no graphs or diagrams in the provided material.*
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