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On January 1,Year 1, you are considering the purchase of $10,000 of Colin Company"s 8%bonds. The bonds are due in 10 years, with interest payable semiannually on June 30 and effective December 31. Based on your analysis of Colin, you determine that a 6% (required) interest rate is appropriate.
Required:
a. Compute the price you will pay for the bonds using the present value model (round the answer to the nearest dollar).
b. Recompute the price in a if your required rate of return is 10%.
c. Describe risk and explain how it is reflected in your required rate of return.
A $1,000 bond has a coupon rate of 10 percent and matures after 8 years. Interest rates are currently 7%.
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Convenient Stores has a bond issue with 10 years to maturity, $1,000 face value, 8% coupon interest compounded semiannually, that are callable in 5 years at $1050. The bonds currently sell in the market for $1,100. What is the yield to maturity?
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