On February 1, 2000, Herro Corp. sold an $800 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 February 1, 2030. The bonds have a coupon rate of 10.00% with interest paid semiannually.

Required: a) Determine the value today, February 1, 2020 of one of these bonds to an investor who requires an 8 percent return on these bonds. Why is the value today different from the par value?

b) Assume that the bonds are selling for $1,175.00. Determine the current yield and the yield-to-maturity.