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Bond question

The XYZ's seven-year $1,000 par bonds pay 9 percent interest. Your required rate of return is 7%. The current market value for the bond is $1,100.

i. Determine the expected rate of return
ii. What is the value of the bonds to you given your required rate of return?
iii. Should you purchase the bond at the current market price?

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i. Determine the expected rate of return

The expected return comes to ...

Solution Summary

The solution explains how to calculate the expected rate of return, price of the bond using the required rate of return and make a decision to buy or not to buy the bond