Question

1. What is the yield to maturity on this​ bond?

2. Should you purchase the bond if the yield to maturity on a​ comparable-risk bond is 12 ​percent?

(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 12 percent interest annually and have 14 years until maturity. You can purchase the bond for S895. a. What is the yleld to maturity con this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 12 percent? a. The yield to maturity on the Saleemi bonds is%. (Round to two decimal places.) ? Enter your answer in the answer box and then click Check Answer. 1 part remainina Clear All Check Answer javascriotdoExercise(6)

Answer 1

a) 13.73%

$1,000 1 2 Par Value 3 Years to Maturity 4 Coupon Rate 5 Current Value 6 Frequency 7 YTM 12% $895.00 1 annual 13.73% 8

1000 14 2 Par Value 3 Years to Maturity 4 Coupon Rate 5 Current Value 6 Frequency 7 YTM 0.12 895 annual =B6*RATE(B3*B6,B4*B2/B6,-B5, B2)

b) If YTM on comparable bond is 12%, you should purchase this bond because this bond is offering you a higher return. Hence, BUY THIS BOND.