Share
Explore BrainMass

# Bond Price & Annual Cost

35. DPips offers a 6 % coupon bond with a yield to maturity of 6.5%. The bond pays interest annually & matures in 12 years. What's the market price of one of these bonds if the face value is \$1,000?

a. 959.21
b. 958.78
c. 947.27
d. 946.39

35b.You need a new oven for your bakery. Your current oven is worn out so you're trying to decide which one of the twe ovens to buy as a replacement. Whichever oven you purchase will be replaced after its useful life. Oven A costs \$25,000 and costs \$3,000 a year to operate over an 8 year life. Oven B costs \$20,000 and costs \$4,500 a year to operate over a 6 year life. Given this information, which one of the following is correct if the applicable discount rate is 10%?

a. The equivalent annual cost of oven A is \$-7,481
b. The equivalent annual cost of oven B is -\$8,209
c. Oven A lowers the annual cost by \$1,406 as compared to oven B.
d. Oven B lowers the annual cost by \$1598 as compared to oven A.

#### Solution Summary

The solution answer multiple choice question related to market price of bond & annual cost.

\$2.19