3) Bond Valuation: Doisneau 16 year bonds have an annual coupon interest of 12%, make interest payment on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 18% are these premium or discount bonds? Explain your answer. What is the price of the bonds?

A) If the bonds are trading with a yield to maturity of 18% the (Select the best choice below)

a. the bonds should be selling at a premium because the bonds coupon rate is greater than the yield to maturity of similar bonds.

b. there is not enough information to judge the value of the bonds.

c. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds.

d. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar bonds.

B. The price of the bond is $___ (round to the nearest cent.)

7. Fingen's 12year, $1000 par value bonds pay 12 % interest annually. the market price of the bonds is $860 and the markets required yield to maturity on a comparable risk bond is 13 percent.

a.Compute the bonds yield to maturity.

b. Determine the value of the bond to you, given your required rate of return.

c. Should you purchase the bond?