6.- (Related to Checkpoint 9.3)(Bond valuation) Doisneau

19

-year

bonds have an annual coupon interest of

11

percent, make interest payments on a semiannual basis, and have a

$1 comma 000

par value. If the bonds are trading with a market's required yield to maturity of

13

percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?

Question content area bottom

Part 1

a. If the bonds are trading with a yield to maturity of

13

%,

then (Select the best choice below.)

A.

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

B.

the bonds should be selling at a

discount

because the bond's coupon rate is

less

than the yield to maturity of similar bonds.

C.

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

D.

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