In: Finance

The 16-year, $1,000 par value bonds of Waco Industries pay 11 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 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.Information provided:

Par value= future value= $1,000

Time= 16 years

Coupon rate= 11%

Coupon payment= 0.11*1,000= $110

Current price= present value= $945

The yield to maturity is calculated by entering the below in a financial calculator:

FV= 1,000

N= 16

PMT= 110

PV= -945

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 11.78.

Therefore, the yield to maturity is 11.78%.

b.Information provided:

Par value = Future value= $1,000

Time= 16 years

Coupon rate= 11%

Coupon payment= 0.11*1,000= $110

Yield to maturity = 10%

The value of the bond is computed by calculating the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

N= 16

I/Y= 10

PMT= 110

Press the CPT key and PV to calculate the present value.

The value obtained is 1,078.34.

Therefore, the value of the bond is $1,078.34.

c.Since the current market price of bond is higher than the value of bond with comparable-risk bond. Therefore, I should not purchase this bond.

In case of any query, kindly comment on the solution.

The 11-year, $1,000 par value bonds of Waco Industries pay 9
percent interest annually. The market price of the bond is
$1,095, and the market's required yield to maturity on a
comparable-risk bond is 6 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?

The 18-year, $1,000 par value bonds of Waco Industries pay 7
percent interest annually. The market price of the bond is $925,
and the market'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.
c.Should you purchase the bond?

The 12-year, $1,000 par value bonds of Waco Industries pay 12
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 14 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?
Round to nearest two decimal places:

(Bond valuation relationships)The 14-year,
$1,000 par value bonds of Waco Industries pay 11 percent interest
annually. The market price of the bond is $1,115, 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?
1) What is your yield to maturity on
the...

The 12-year, $1,000 par value bonds of Waco Industries pay 12
percent interest annually. The market price of the bond is
$1,135, and the market's required yield to maturity on a
comparable-risk bond is 9 percent. Compute the bond's yield to
maturity.1. Determine the value of the bond to you given the market's
required yield to maturity on a comparable-risk bond.

The 11-year, $1,000 par value bonds of Witt Industries pay 7
percent interest annually. The market price of the bond is $865,
and the market’s required yield to maturity on a comparable-risk
bond is 10 percent. A. What is your yield to maturity on the Witt
bonds given the current market price of the bonds? _% Please round
to two decimal places. B. What should be the value of the Witt
bonds given the market's required yield to maturity on...

The 19-year, $1000 par value bonds of Waco Industries pay 8
percent interest annually. The market price of the bond is $1105,
and the market's required yield to maturity on a comparable-risk
bond is 5 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...

The 17 year, $1000 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 5 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?

Fingen's 15-year, $1,000 par value bonds pay 11
percent interest annually. The market price of the bonds is $920
and the market's required yield to maturity on a comparable-risk
bond is 14 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?

The 12-year, $1,000 par value bonds of Smith Industries pay 7
percent interest annually. The market price of the bond is $885,
and the market’s required yield to maturity on a comparable-risk
bond is 10 percent.
What is your yield to maturity on the Smith bonds given the
current market price of the bonds? Round to two decimal
places.
What should be the value of the Smith bonds given the market's
required yield to maturity on acomparable-risk bond? Round to...

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