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​(Bond valuation) The 8​-year ​$1,000 par bonds of Vail Inc. pay 9 percent interest. The​ market's...

​(Bond valuation) The 8​-year ​$1,000 par bonds of Vail Inc. pay 9 percent interest. The​ market's required yield to maturity on a​ comparable-risk bond is 14 percent. The current market price for the bond is $ 850.

a.  Determine the yield to maturity.

b.  What is the value of the bonds to you given the yield to maturity on a​ comparable-risk bond?

c.  Should you purchase the bond at the current market​ price?

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Answer #1

A) Yield to maturity f the bond is given below by solving in excel

b) Value of the bond

Price of bond=$768.06

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C)since market value of bond is HIGHER than book value of bond.Investor should NOT purchase the bond

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