The 17-year, $1,000 par value bonds of Waco Industries pay 8
percent interest annually. The market price of the bond is $925,
and the market's required yield to maturity on a comparable-risk bond is 10%
percent.
a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? ____%
b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?
a) Yield to maturity on a market price of 925:
=RATE(17,8%*1000,-925,1000)
=8.87%
b) Value of bond on 10% return:
=PV(10%,17,8%*1000,1000)
=839.57
c) No
The 17-year, $1,000 par value bonds of Waco Industries pay 8 percent interest annually. The market...
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