The Brownstone Corporation's bonds have 5 years remaining tomaturity. Interest is paid annually, the bonds have a $1,000 parvalue, and the coupon interest rate is 9%. What is the yield tomaturity at a current market price of $828? Round your answer totwo decimal places. %
What is the yield to maturity at a current market price of$1,100? Round your answer to two decimal places. %
Would you pay $828 for one of these bonds if you thought thatthe appropriate rate of interest was 13% - that is, if rd =13%?
Explain your answer.
I. You would buy the bond as long as the yield to maturity atthis price does not equal your required rate of return.
II. You would buy the bond as long as the yield to maturity atthis price is greater than your required rate of return.
III. You would buy the bond as long as the yield to maturity atthis price is less than your required rate of return.
IV. You would buy the bond as long as the yield to maturity atthis price equals your required rate of return.
