Compute the Price of Bonds for Olsen's Clothing Stores
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You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 13 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 25 years to maturity. Compute the price of the bonds based on semiannual analysis. With 20 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds?
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Solution Summary
This solution calculates the new price of the bonds if yield to maturity drops in the attached Excel file.
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A bond price is just the sum of two cash flow streams: the periodic interest payments and the ...
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