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