Question

The Saleemi Corporation's $1,000 bonds pay 12 percent interest annually and have 15 years until maturity. You can purchase the bond for $905 . a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 15 percent?

Answer #1

Given about Saleemi Corporation bond,

years to maturity = 15 years

face value = $1000

coupon rate = 12% paid annually

annual coupon payment = 12% of 1000 = $120

current price of the bond = $905

a). bond's yield to maturity can be calculated using on financial calculator using following values:

FV = 1000

PV = -905

PMT = 120

N = 15

compute for I/Y, we get I/Y = 13.51

So, Yield to maturity on the bond is 13.51%

b). If yield to maturity on comparable bond is 15%

Price can be calculated using following values on financial calculator

FV = 1000

N = 15

PMT = 120

I/Y = 15

compute for PV, we get PV = -824.58

So, value of the bond based on YTM of comparable bond is $824.58

Since the actual value of the bond is more than the comparable market bonds and its YTM is also less as compare to other comparable bond, so bond should not be purchased.

The Saleemi Corporation's $1000 bonds pay 8 percent interest
annually and have 12 years until maturity. You can purchase the
bond for $935. a. What is the yield to maturity on this bond?
b. Should you purchase the bond if the yield to maturity on a
comparable-risk bond is 7 percent? a. The yield to maturity on
the Saleemi bonds is

(Yield to maturity) The Saleemi
Corporation's $1,000 bonds pay 11 percent interest annually and
have 12 years until maturity. You can purchase the bond for
$955.
a. What is the yield
to maturity on this bond?
b. Should you
purchase the bond if the yield to maturity on a comparable-risk
bond is 10 percent?
1) The yield to
maturity on the Saleemi bonds is__% (Round to two decimal
places.)
--->You should not OR
should not purchase the bonds because your...

The Saleemi Corporation's $1,000 bonds pay 7 percent interest
annually and have 14 years until maturity. You can purchase the
bond for $865.
a. What is the yield to maturity on this bond?
b. Should you purchase the bond if the yield to maturity on a
comparable-risk bond is 10%

The Saleemi Corporation's $1000 bonds pay 9 percent interest
annually and have 9 years until maturity. You can purchase the bond
for $1125.
a. What is the yield to maturity on this bond?
b. Should you purchase the bond if the yield to maturity on a
comparable-risk bond is 6 percent?

The Saleemi
Corporation's $1000 bonds pay 11 percent interest annually and have
9 years until maturity. You can purchase the bond for $1145.
a. What is the yield to maturity on this
bond?
b. Should you purchase the bond if the yield to
maturity on a comparable-risk bond is 7 percent?

The Saleemi Corporation's $1000 bonds pay 6 percent interest
annually and have 14 years until maturity. You can purchase the
bond for $1 075.
a.What is the yield to maturity on this bond?
b.Should you purchase the bond if the yield to maturity on a
comparable-risk bond is 4 percent?
a.The yield to maturity on the Saleemi bonds is __%.

(Related to Checkpoint 9.2) (Yield to maturity) The
Saleemi Corporation's
$1 comma 0001,000
bonds pay
1111
percent interest annually and have
88
years until maturity. You can purchase the bond for
$1 comma 0651,065.
a. What is the yield to maturity on this bond?
b. Should you purchase the bond if the yield to maturity on a
comparable-risk bond is
88
percent?
a. The yield to maturity on the Saleemi bonds is _____%.
(Round to two decimal places.)

(Bond valuation) Fingen's 15 year, $ 1,000 par value bonds pay
12 percent interest annually. The market price of the bonds is $
1,110 and the market's required yield to maturity on a
comparable-risk bond is 9 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

Fingen's 15-year, $1,000 par value bonds pay 11 percent
interest annually. The market price of the bonds is $1,070 and
the market's required yield to maturity on a comparable-risk bond
is 12 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

Bond valuation) The 12 year $1,000 par bonds of Vail Inc. pay
12 percent interest. The market's required yield to maturity on a
comparable-risk bond is 9 percent. The current market price for the
bond is $1,080.
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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