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f1515 week 3 - Pages 210 211 5.1 Jackson Corporation's...

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Pages 210 - 211 5.1 Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually...? Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the market price of these bonds? P = F*r*[1 -(1+i)^-n]/i + C*(1+i)^-n F = par value C = maturity value r = coupon rate per coupon payment period i = effective interest rate per coupon payment period n = number of coupon payments remaining In this problem F = 1000. And, since we are not given the maturity value, we can assume that it is the same as the par value. Therefore, C = 1000. r = .08 i = .09 n = 12 Plug the numbers into the equation: 1000*.08 * (1 - 1.09^-12)/.09 + 1000*1.09^-12 = $928.39 5.2 Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10% the bonds sell at a price of $850. What is their yield to maturity?
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