Problem
The 8-year $1,000 par bonds of Vail Inc. pay 8 percent interest. The market's required yield to maturity on a comparable-risk bond is 5 percent. The current market price for the bond is $1,100.
i. Determine the yield to maturity.
ii. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond?
iii. Should you purchase the bond at the current market price?