Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...

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Finance

Harrimon Industries bonds have 4 years left to maturity.Interest is paid annually, and the bonds have a $1,000 par valueand a coupon rate of 8%.
A)What is the yield to maturity at a current market priceof:
1) $808? Round your answer to two decimal places.
_%
2) $1,065? Round your answer to two decimal places.
_%
B) Would you pay $808 for each bond if you thought that a "fair"market interest rate for such bonds was 14%-that is, if rd = 14%?(select one of the following)
I. You would buy the bond as long as the yield to maturity atthis price is less than your required rate of return.
II. You would buy the bond as long as the yield to maturity atthis price equals your required rate of return.
III. You would not buy the bond as long as the yield to maturityat this price is greater than your required rate of return.
IV. You would not buy the bond as long as the yield to maturityat this price is less than the coupon rate on the bond.
V. You would buy the bond as long as the yield to maturity atthis price is greater than your required rate of return.

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4.0 Ratings (810 Votes)

a1Yield to Maturity of the Bond if the Current Market price is 808 The Yield to maturity of YTM of the Bond is the discount rate at which the Bonds price equals to the present value of the coupon payments plus the present value of the Face ValuePar Value The Yield to maturity of YTM of the Bond is the estimated annual rate of return expected by the bondholders for the bond assuming that See Answer

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Harrimon Industries bonds have 4 years left to maturity.Interest is paid annually, and the bonds have a $1,000 par valueand a coupon rate of 8%.A)What is the yield to maturity at a current market priceof:1) $808? Round your answer to two decimal places._____%2) $1,065? Round your answer to two decimal places._____%B) Would you pay $808 for each bond if you thought that a "fair"market interest rate for such bonds was 14%-that is, if rd = 14%?(select one of the following)I. You would buy the bond as long as the yield to maturity atthis price is less than your required rate of return.II. You would buy the bond as long as the yield to maturity atthis price equals your required rate of return.III. You would not buy the bond as long as the yield to maturityat this price is greater than your required rate of return.IV. You would not buy the bond as long as the yield to maturityat this price is less than the coupon rate on the bond.V. You would buy the bond as long as the yield to maturity atthis price is greater than your required rate of return.