The 16-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $1,135 and the market's required yield to maturity on a comparable-risk bond is 4 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?