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    Heymann Company's Bonds: Yield to Maturity

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    6-7 The Heymann Company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a $1000 par value; and the coupon interest rate is 9%.
    a) What is the yield to maturity at a current market price of (1) $829 or (2) $1104?
    b) Would you pay $829 for one of these bonds if you thought that the appropriate rate of interest was 12%-that is, if Rd=12%? Explain your answer.

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    Solution Preview

    See attached file.

    6-7 The heymann Company's bonds have 4 years remaining to maturity.  Interest is paid annually; the bonds have a $1000 par value; and the coupon interst rate is 9%.

    a) What is the yield to maturity at a current market price of (1) $829 or (2) $1104?

    Yield to maturity

    Yield to maturity can be calculated using Excel worksheet function RATE

    a) Current Market Price= $829

    Data
    No of years= 4
    Coupon rate= 9.00%
    Face value= $1,000
    Frequency = A = ...

    Solution Summary

    The Yyeld to maturity of Heymann Company's bonds are calculated for different current market prices.

    $2.19

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