Transcribed Image Text
You are called in as a financial analyst to appraise the bondsof Olsen’s Clothing Stores. The $1,000 par value bonds have aquoted annual interest rate of 8 percent, which is paidsemiannually. The yield to maturity on the bonds is 10 percentannual interest. There are 20 years to maturity. Use Appendix B andAppendix D for an approximate answer but calculate your finalanswer using the formula and financial calculator methods.a. Compute the price of the bonds based onsemiannual analysis. (Do not round intermediatecalculations. Round your final answer to 2 decimalplaces.)b. With 15 years to maturity, if yield tomaturity goes down substantially to 6 percent, what will be the newprice of the bonds? (Do not round intermediatecalculations. Round your final answer to 2 decimal places.)