Fingen’s 17-year, $1,000 par value bonds pay 15 % interest annually. The market price of the bonds of $930 and the market’s required yield to maturi on a comparable-risk bond is 18 %.
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?
a. What is your yield to maturity on the Fingen bonds given the market price of the bonds?
b. If the yield to maturity on a comparable risk bond is 18 %, what should be the value of the Findgen bonds?
c. Should you purchase the bond?