Calculate the value of the bond. b.  How does the value change if the​ market's required yield to maturity on a​ comparable-risk bond​ (i) increases to 12 percent or​ (ii) decreases to 4 ​percent? c.  Interpret your finding in parts a and b.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN:9781337514835
Author:MOYER
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Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 26P
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​(Bond valuation​ relationships)  A bond of Visador Corporation pays
​$70
in annual​ interest, with a
​$1,000
par value. The bonds mature in
18
years. The​ market's required yield to maturity on a​ comparable-risk bond is
8.5
percent.
 
a.  Calculate the value of the bond.
b.  How does the value change if the​ market's required yield to maturity on a​ comparable-risk bond​ (i) increases to
12
percent or​ (ii) decreases to
4
​percent?
c.  Interpret your finding in parts a and
b.
 
 
 

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Part 1
a.  What is the value of the bond if the​ market's required yield to maturity on a​ comparable-risk bond is
8.5
​percent?
 
​$enter your response here  
​(Round to the nearest​ cent.)
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