Computation of Yield to Maturity and decision making
You are considering Dell Company and MCI Company bonds. Dell Company bonds mature in 10 years and have a coupon rate of 10% with interest paid semi-annually. MCI Company bonds mature in 12 years and have a coupon rate of 12% with interest paid annually. Both bonds have a par rate of $1,000. Dell bonds are currently selling for $1,100 while the MCI bonds are priced at $1,350 If your required rate of return is 8%, which of these bonds should you buy? Present your reasoning.