Grohl Co$.$ issued $11-$year bonds at a coupon rate of $11$ percent. The bonds make semiannual payments. If the yield to maturity on these bonds is $10$ percent, what is the current bond price?

Reminder from undergraduate class: Coupon bonds pay interest $($called the coupon$)$ on the face value $($amount originally borrowed and to be re$-$paid at maturity$).$ The discount rate implicit in the bond's price is called the yield to maturity, or simply the yield. The bond's face value should be assumed to be $$1,000$ and the annual coupon is paid in two installments, unless otherwise stated. Note that bond yields and coupons are always quoted as APRs. So if the problem quotes a $10\%$ coupon bond that matures in $5$ years, the bond actually pays $$50($or $5\%$ of $$1,000)$ every $6$ months $($which is $10\%$ of face value over one year$),$ and there would be $10$ coupons to be paid $(2$ each year for $5$ years$).$

We value all assets by calculating the present value of future cash flows generated by the asset. Coupon bonds have two types of cash flow: the coupons $($interest payments$)$ which are paid every six month, and the repayment of the face value $($which is the original amount borrowed$).$ So to value a coupon bond you use the yield to maturity to value the coupons as an annuity, and then add the present value of the payment of $$1,000($the face value, which is re$-$paid at maturity$).$