Computation of ytm and decision making


Question: You are considering Dell Company and MCI Company bonds. Dell Company bonds mature in ten years and have a coupon rate of 10 percent with interest paid semiannually. MCI Company bonds mature in twelve years and have a coupon rate of 12 percent with interest paid annually. Both bonds have a par rate of $1,000. Dell bonds are currently selling for 1,100 dollar while the MCI bonds are priced at $1,350 if your required rate of return is 8 percent; estimate which of these bonds should you buy? Explain your reasoning.

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Finance Basics: Computation of ytm and decision making
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