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7) (Bond valuation) Fingen's 18-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $1,080 and the market's required yield to maturity on a comparable-risk bond is 10 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?

a.What is your yield to maturity on the Fingen bonds given the market price of the bonds?

% (Round to two decimal places.) _____________

8) (Yield to maturity) Abner Corporation's bonds mature in 17 years and pay 11 percent interest annually. If you purchase the bonds for $1,275, what is your yield to maturity?

Your yield to maturity on the Abner bonds is %. (Round to two decimal places.) ________

9) (Bond valuation) The 7-year $1,000 par bonds of Vail Inc. pay 15 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 $1,120.

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?

a. What is your yield to maturity on the Vail bonds given the current market price of the bonds?

% (Round to two decimal places.) _______________________

10) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 13 years until maturity. You can purchase the bond for $855.

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 99 percent?

a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.) _______

11) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $895 and the market's required yield to maturity on acomparable-risk bond is 10 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?

a.What is your yield to maturity on the Waco bonds given the current market price of the bonds?

% (Round to two decimal places.) ____________________

12) (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is

4.5 percent and the expected inflation rate is 6.7 percent?

The nominal rate of interest would be %. (Round to two decimal places.) __________________

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