The 16-year, $1,000 par value bonds of Waco Industries pay 12 percent interest annually. The market price of the bond is $1,115, and themarket’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 the market’s required yield to maturity on a comparable-risk bond.
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c. Should you purchase the bond?
a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? __% (Round to two decimal places.)