Total return required rate remaining until maturity

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Reference no: EM132028965

Microform, Inc. issued bonds 10 years ago at $1,000 per bond. These bonds had a 15 year life when issues and the annual interest rate / coupon on the bonds was then 12%. This return was in line with the required returns by bondholders at that point as described next: Real Rate of Return = 4% Inflation Premium = 4% Risk Premium = 4% Total Return = 12% Assume that 10 years later the inflation premium is only 2% and the Risk Premium is now 8%. The Real Rate of Return remained at 4%. The new Total Return (yield) required rate remaining until maturity, would compute to what new price on the bond?

Reference no: EM132028965

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