Question

The 11​-year, ​$1000 par value bonds of Waco Industries pay 7 percent interest annually. The market...

The 11​-year, ​$1000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is ​$​1135, and the​ market's required yield to maturity on a​ comparable-risk bond is 4 percent.

a. Compute the​ bond's yield to maturity.

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?

Homework Answers

Answer #1

a) bond yield to maturity is

b) bond price

c) since bond trading price is less than intrinsic value of bond i.e. 1135<1262.81

bond is underpriced , one should purchase the bond

plz leave me positive rating thank you

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