The 18​-year, ​$1,000 par value bonds of Waco Industries pay 6 percent interest annually. The market price of the bond is ​$945​, 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. c.  Should you purchase the​ bond?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The
18​-year,
​$1,000
par value bonds of Waco Industries pay
6
percent interest annually. The market price of the bond is
​$945​,
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.
c.  Should you purchase the​ bond?
 
 
 

Question content area bottom

Part 1
a.  What is your yield to maturity on the Waco bonds given the current market price of the​ bonds?
 
enter your response here​%
​ (Round to two decimal​ places.)
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