If it’s valid to say that fall in stock price is evidence that managers are not acting in the interest of stockholders

Question

You are called in as a financial analyst to appraise the bonds of Ollie’s Walking Stick Stores. The $5,000 par value bonds have a quoted annual interest rate of 8 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 12 years to maturity. a. Compute the price of the bonds based on semiannual analysis. b. With 8 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds?

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Chapter 1, Problem 20PROB

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To determine: If it’s valid to say that fall in stock price is evidence that managers are not acting in the interest of stockholders

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