American Telephone & Telegraph has issued 818 percent debentures that will mature on July 15, 2024. Assume

Question:

American Telephone & Telegraph has issued 81⁄8 percent that will mature on July 15, 2024. Assume that interest is paid and compounded annually. If an investor purchases a $1,000 denomination bond for $1,025 on July 15, 2004, determine the bond’s yield to maturity. Explain why an investor would be willing to pay $1,025 for a bond that is going to be worth only $1,000 at maturity.

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who...