Question: Your broker is recommending a bond investment in a clothing company, Petty Foire, and you require a market return of 8%. The bonds are issued with a face value of $1,000 and pay a 6% fixed interest rate 15 years maturity with annual compounding.
a. What is the market price you are willing to pay to buy and invest in this bond?
b. What is your required rate of return, if the market price of the bond is currently selling for $908.48 when you invest in the bond now?