Final answer:
The bond's yield to maturity (YTM) compares the current market price to future expected cash flows and must be calculated with the provided financial information. The value of the bond to an individual depends on personal required rates of return which can determine whether the bond is a suitable investment or not.
Step-by-step explanation:
To compute the bond's yield to maturity (YTM), you need to solve for the interest rate in the present value of annuity formula that equates the price of the bond to the present value of its cash flows (interest payments and principal repayment). Given that the Fingen bond's market price is $900 and its par value is $1,000 with an annual coupon of 8%, your calculation would involve finding the YTM that equates this $900 to the present value of $80 annual payments plus the $1,000 repayment at the bond's maturity. This is usually done using a financial calculator or spreadsheet because it involves solving for the rate in a complex equation.
The value of the bond to you can be calculated by discounting the bond's cash flows at your required rate of return. If your required rate of return is higher than the bond's coupon rate, the value of the bond to you will be less than its par value.
Whether you should purchase the bond depends on your comparison of the bond's YTM with your required rate of return. If the YTM is higher than your required rate of return, the bond may be considered a good investment. Conversely, if the YTM is lower, you may decide not to purchase the bond.