National steel 15-year, $1,000 par value bonds pay 8 percent interest

(Bond valuation) National Steel 15-year, $1,000 par value bonds pay 8 percent interest annually. The market price of the bonds is $1,085, and your required rate of return is 10 percent.

 

a. Compute the bond’s expected rate of return.

The expected rate of return is 7%

 

b.Determine the value of the bond to you, given your required rate of return.

 

 

c.Should you purchase the bond?

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