Problem
The 18-year, $1,000 par value bonds of Waco Industries pay 12 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 11 percent.
1) Compute the bond's yield to maturity.
2) Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.
3) Should you purchase the bond?