Question

P9-17 (similar to) restaul Thematic of the bond 31. 05, and the marke d Rotated to Checkpoint 2.2 and Checkpoint Bond valuation relationships) The 15 year $1.000 par value bonds of Wisco Industries pay percent Yold to maturity on a comparable bond is percent Compute the bond's yield to maturity 6. Delware the weathe bond to you given the markers regarded to marry on a comparatie bond you purchase the band? What is your yeld te marty on the Wece bonds ven the current ma price of the bons? Round to two decimal places)

Answer 1

90 4 90 Actual YTM 7.92% Time in Years Money received PV of CF 90 $83.39 2 90 $77.27 3 90 $71.601 90 $66.35 90 $61.48 90 $56.97 90 $52.78 90 $48.91 90 $45.32 90 $41.99 90 $38.91 $36.06 90 $33.41 90 $30.96 90 $28.69 16 1090 $321.91 Price $1,096.00 Market YTM 6.00% Time in Years Money red PV of CF 1 90 $84.91 90 $80.101 $75.57 90 $71.29 90 $67.25 90 $63.45 $59.86 $56.47 $53.27 $50.26 90 $47.41 90 $44.73 13 90 $42.20 14 90 $39.81 15 90 $37.55 16 1090 $429.07 Value $1,303.18 90 90 90 16

The YTM is calculated with triyal and error method or financial calculator or goal seek on excel

The YTM of the bond is 7.92% which is higher than market YTM

The price of the bond at market YTM which is 6% is $1303.18

As the bond is trading at a discount it should be bought