On April 1, 2013, Victor Corp. sold a $700 million bond issue to finance the purchase of a new distribution facility. These bonds were issued in $1,000 denominations with a maturity date of April 1, 2033. The bonds have a coupon rate of 8.00% with interest paid semiannually.

Required:

(a) Determine the value today, April 1, 2023 of one of these bonds to an investor who requires a 12 percent return on these bonds. Why is the value today different from the par value?

(b) Assume that the bonds are selling for $925.00. Determine the current yield and the yield-to-maturity. Explain what these terms mean.

(c) Explain what layers or textures of risk play a role in the determination of the required rate of return on Victor’s bonds