please answer questions A-B. HW Score : 44 % , 22 of 50 pts P9-16 (similar to) Q
ID: 2618121 • Letter: P
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please answer questions A-B.
HW Score : 44 % , 22 of 50 pts P9-16 (similar to) Question Help ration's $1,000 bonds pay 9 percent interest annually and have 9 years until maturity You can purchase the (Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corpor y bond for $1,155 a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 5 percent? a. The yeld to maturity on the Saleemi bonds is % (Round to two decimal places) Enter your answer in the answer box and then click Check Answer part Clear All O Type here to search 555 PMExplanation / Answer
Price of bond = coupon * (1 - (1+r/m)^(-n*m))/r + face value/( 1 + r/m)^(n*m)
where r is yield and n is number of year to maurity
Coupon = $90
Face value = $1000
n = 9
m= 1
Price of bond = $1155
Using all the above value we can find r
r = 6.66%
Yield to maturity on the Saleemi Bond is 6.66%
Yes I will purchase the bond because if the YTM will be 5% then the value of bond will be higher but I am getting this bond at lower price in comparision to YTM of 5% bond.
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