bonds of Waco Industries
The 15-year, $1, 000 par value bonds of Waco Industries pay 9 percent interest annually. The market price of the bond is $955, and the market’s required yield to maturity on a comparable-risk bond is 8 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.
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c. Should you purchase the bond?