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stranahan stranahan
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Posts: 3324
5 years ago
Curtis Equipment Inc., $1,000 par value, 15% annual coupon bonds, have 6 years remaining to maturity and are currently selling for $938.45. What is the firm's yield to maturity for these bonds?
A) 16.66%
B) 15.47%
C) 15.00%
D) 16.70%
Textbook 

Financial Management: Core Concepts


Edition: 2nd
Author:
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waspchichesterwaspchichester
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5 years ago
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More questions for this book are available here
D -- The answer is found through an iterative (trial and error) process using the bond pricing formula.
Bond Price = PMT × ((1 - (1/(1 + r)n)/r)) + (FV/(1 + r)n);
$938.45 = $150 × ((1 - (1/(1 + r)6)/r)) + ($1,000/(1 + r)6);
r = 16.70%

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