You own XYZ Inc. bond with term-to-maturity of 20 years. It pays 7% interest annually. The current market price of the bond is $875. You require a rate of return of 10%. The par value of the bond is $1,000.

The YTM of XYZ inc. bond is:

What is your decision if you are trying to maximize your wealth?

a. you will not but the bond

b. you will buy the bond

c. there is no information provided to make the decision

d. you are indifferent to the buy or do not buy decision.

e. none of the above

The EMZ Inc. just issued a zero-coupon bond with term-to-maturity of 7 years. Your required rate of return is 10% and the expected rate of return is 9%, compounded annually. At what market price EMZ Inc. issued the bond?