Answered: An investor is considering a discount…

An investor is considering a discount bond that promises a payment of $14,400 in two years. If today's price for the bond decreases from 13,900 to 13,100, then the yield rises from to.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...

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Question

An investor is considering a discount bond that promises a payment of $14,400 in two

years. If today's price for the bond decreases from 13,900 to 13,100, then the yield

rises from

to.

Expert Solution

Given,

Bonds are issued by the company to meet the financial requirements of the company without losing its ownership. They are issued at par, discount, or premium. At the time of redemption, the bond value is equal to the face value of the bond.

Face Value = $14,400

Bond Price = $13,900

Time Period = 2 years

New Price = $13,100

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