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YIELD TO MATURITY Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%. a. What is the yield to maturity at a current market price of (1) $865 and (2) $1,166? b. Would you pay $865 for each bond if you thought that a “fair” market interest rate for such bonds was 12%—that is, if r d = 12%? Explain your answer.

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

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Chapter
Section
Chapter 7, Problem 9P
Textbook Problem

YIELD TO MATURITY Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.

  1. a. What is the yield to maturity at a current market price of (1) $865 and (2) $1,166?
  2. b. Would you pay $865 for each bond if you thought that a “fair” market interest rate for such bonds was 12%—that is, if rd = 12%? Explain your answer.

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Chapter 7 Solutions

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