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Johnson Inc. issued bonds in June, 2017, which were originally issued as 12-year bonds. They carry an interest rate of 6% p.a., paid semi-annually. Bonds

Johnson Inc. issued bonds in June, 2017, which were originally issued as 12-year bonds. They carry an interest rate of 6% p.a., paid semi-annually. Bonds of the same quality have been recently issued by other companies, and they carry an interest coupon of 10% p.a., also paid semi-annually.

a. Before doing any calculations, decide whether this bond is currently selling at par, a premium, or a discount, and briefly say why you think so.

b. Calculate the theoretical value of the Johnson bond.

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