(Bond valuation). The 8-year $1000 par bonds of Vail Inc. pay 11% interest. The markets required yield to maturity on a comparable-risk bond is 13%. The current market price for this bond is $860.
a. Determine the yield to maturity.
b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond?
c. Should you purchase the bond at the current market price? -------------------------
a. What is your yield to maturity on the Vail bonds given the current market price of the bond? _____%
b. What should be the value of the bail bonds given the yield to maturity on a comparable-risk bond? $______.
c. You (should? or should not) purchase the Vail bonds at the current market price because they are currently (overpriced or underpriced).