6. Green Polymers, Inc. is thinking of issuing a new series of bonds on January 1, 2017. To entice investors to buy these bonds, Green Polymers tentative plan is to sell these bonds at a five percent discount to their face value. These bonds will mature in 30 years (on December 31, 2046), at which time investors will receive the face value of $1,000. Coupon interest payments will be made semi-annually, on June 30 and December 31 of each year. The bonds will have a coupon rate of 10% per year, or (10%/2) = 5% per semi-annual period.

a) On the date of issue (January 1, 2017) for these bonds, what would be the nominal yield to maturity (YTM) (i) per semi-annual period; and (ii) per year, compounded semi-annually?

b) What would be the effective annual yield to maturity on these bonds?

c) What would be the price of these bonds on January 1, 2020 (five years later), assuming that the market interest rate for these bonds had fallen to 8%?

d) Using a few complete and concise sentences (at most), comment on the results in part c). -- It will be helpful to draw a cash flow diagram, or other relevant figure, to guide my thinking. For questions that ask for an answer involving words please respond in complete and concise sentences. Please state explicitly any assumptions that you think you need to solve a problem. Unless specified otherwise, all interest rates in this problem are compound interest rates.