10. (Related to checkpoint 9.2) (Yield to maturity) The Saleemi Corporation\'s $

Question

10. (Related to checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1 ,000 bonds pay 12 percent interest annually and have 12 years until maturity. You can purchase the bond for $1,095. 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 12 percent? a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.) b. You should not purchase the bonds because your yield to maturity on the Saleemi bonds should is less than the one on a comparable risk bond. (Select from the drop-down menus.) greater

Explanation / Answer

a) Use Rate funcion in excel.

RATE(nper, pmt, pv, [fv], [type], [guess])

=RATE(12,120,-1095,1000)

=10.57%

b) Should , Greater.

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