Grohl Co. issued 6-year bonds at a coupon rate of 6 percent. The bonds make semiannual payments. If the yield to maturity on these bonds is 11 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). Multiple Choice $784.54 $794.54 $1,478.02 Multiple Choice O $784.54 O $794.54 $1,478.02 $834.53 O $862.93