(Bond valuation) The 8-year $1,000 par bonds of Vail Inc. pay 11 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 $1,130.
- What is your yield to maturity on the Vail bonds given the current market price of the bonds? (Round to two decimal places.)
- What should be the value of the Vail bonds given the yield to maturity on a comparable risk bond? (Round to the nearest cent.)
- Should you purchase the bond at the current market price?
YTM = I + [(P1-P0)/n]/(P1+P0)/2 = 110 + [ (1000-1130)/8]/(1000+1130)/2 = 110 -16.25/ 1065 = 0.0880 = 8.80% What should be the value of the Vail bonds given the yield to maturity on a comparable ris...
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Sep 21, 2019EXPERT
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