1 (Yield to maturity) The Saleemi Corporation's $1 comma 000 bonds pay 9 percent interest annually and
have 11 years until maturity. You can purchase the bond for $1 comma 065.
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 10 percent?
2 Bond valuation relationships) The 15-year, $1 comma 000 par value bonds of Waco Industries pay 6 percent interest annually. The market price of the bond is $1 comma 155, and the market's required yield to maturity on a comparable-risk bond is 3 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?
3 (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real rate is 3.7 percent and the expected inflation rate is 7.3 percent?