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Market Yield Rates and Bond Values
Smith & Company issued \$80 million maturity value of 5-year bonds, which carried a coupon rate of 6%, with interest paid semiannually.

At the time of the debt offering, equivalent risk-rated bonds were yielding 8%.

One year after the 5-year bond offering, yield rates had risen to 10%; but, by the second anniversary of the bond sale, the yield rate on similarly risk-rated debt instruments had dropped to only 4%.

Calculate the proceeds from the sale of the 6%, 5-year bonds.

Calculate the book value of the bonds after 1 year and after 2 years.
Do not round until final answer. Round answers to the nearest dollar.

Calculate the market value of the bonds after one year and after two years.

What is the relationship between market yield rates and bond values?

Market Yield Rates and Bond Values
F= 80million
Bond Price= \$80, 5 Years, 6% semiannual payments
N= 5X2= 10 periods
C= 6/2= 3%
I= Risk rated bonds=8/2= 4%
Net proceeds is the price of the bond....

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