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8 October, 19:07

The 7 -year $1 comma 000 par bonds of Vail Inc. pay 9 percent interest. The market's required yield to maturity on a comparable-risk bond is 7 percent. The current market price for the bond is $ 1 comma 100. 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?

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  1. 8 October, 21:30
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    a) Yield to maturity = 8.14%

    b) The value of the bonds = $917.99

    c) Since market value of bond is higher than book value of bond. So investor should not purchase the bond.
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