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Chapter 6, Problem 6.11P

Subpart (a)

Summary Introduction

To calculate: Dollar price of the bond.

Introduction:

Bond price: Bond price is the price quoted multiplied by par value of bond.

Subpart (b)

Summary Introduction

To calculate: Total interest expense.

Introduction:

Current yield of bond: Current yield of bond is the annual interest payment divided by the current price of bond.

Subpart (c)

Summary Introduction

To discuss: Is the bond sells at par, at discount or at premium.

Subpart (d)

Summary Introduction

To discuss: Comparison of bond current yield and YTM.

Introduction:

Yield to maturity (YTM): The rate of return on bond bought on a given day and held to maturity is called as yield to maturity.

Current yield of bond: Current yield of bond is the annual interest payment divided by the current price of bond.

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Chapter 6 Solutions

Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)

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