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Compute the bond expected rate of return

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Reference no: EM131514653

Premier Textbooks has been a leader in elementary textbooks for over 25 years. Recently, you received a bonus of $10,000 from your company, which had their best year in 5 years.

You would like to invest in bonds with a good, solid company and are considering Premier Textbooks. Recently,Premier has offered a new 15 year bond issue of $500,000, with a par value of $1000 per bond. They pay 5.5per cent interest and the current market price for these bonds is $1085. Your required rate of return is 7%.

Required:

  1. Compute the bond's expected rate of return.
  2. Calculate the value of the bond to you,given your required rate of return.
  3. Should you purchase the bond? Explain.
  4. Name at least 2 other facts about this or any other bond you might consider buying that would help you decide on whether you should buy the bond.

Reference no: EM131514653

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