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The 18?-year, ?$1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market...

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Finance

The 18?-year, ?$1,000 par value bonds of Waco Industries pay 7percent interest annually. The market price of the bond is ?$925?,and the? market's required yield to maturity on a? comparable-riskbond is 9 percent.

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

b.Determine the value of the bond to you given the? market'srequired yield to maturity on a? comparable-risk bond.

c.Should you purchase the? bond?

Answer & Explanation Solved by verified expert
4.5 Ratings (995 Votes)
a Price of bond PV 925 Par value of bond FV 1000 Annual coupon payment PMT 1000 7 70 No of annual coupon payments pending to be received N 18 Therefore Yield to    See Answer
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Transcribed Image Text

The 18?-year, ?$1,000 par value bonds of Waco Industries pay 7percent interest annually. The market price of the bond is ?$925?,and the? market's required yield to maturity on a? comparable-riskbond is 9 percent.a.Compute the? bond's yield to maturity.b.Determine the value of the bond to you given the? market'srequired yield to maturity on a? comparable-risk bond.c.Should you purchase the? bond?

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