Answered

Welcome to Westonci.ca, your go-to destination for finding answers to all your questions. Join our expert community today! Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 6 percent annual interest and has 15 years remaining to maturity. The current yield to maturity on similar bonds is 11 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. What is the current price of the bonds?
b. By what percent will the price of the bonds increase between now and maturity? (Round "PV Factor" to 3 decimal places, intermediate and final answers to 2 decimal places. Omit the "%" sign in your response.) Price increases by %

Sagot :

Tundexi

Answer:

Future value = FV = 1000

Annual interest = i = 0.06

Yield to maturity = y = 0.15

Number of years = N = 15

Annuity Value = A = 60

PV_IFA = 5.847

PV_IF = 0.1229

1. PV of interest = A*PV_IFA   =  350.82

PV of principal = FV * PV_IF = 122.9

Bond Price =                             $473.72

2. Percent increase at maturity

Maturity Value      $1,000.00

Current price        $473.72

Dollar increase     $526.28

We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Thank you for choosing our platform. We're dedicated to providing the best answers for all your questions. Visit us again. Your questions are important to us at Westonci.ca. Visit again for expert answers and reliable information.