Problem 8.19

Carla Vista Corp. management plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $442.36. What is the yield to maturity on these bonds? (Round answer to 3 decimal places, e.g. 15.251%.)

Yield to maturity:

Comments:

• I came up with 49.75%
• The answer is incorrect
• Please show me the right answer and how you arrived to that answer.

Problem 8.14 a1-a4

Sandhill Information Systems management is planning to issue 10-year bonds. The going market yield for such bonds is 9.150 percent. Assume that coupon payments will be made semiannually. Management is trying to decide between issuing an 9 percent coupon bond or a zero coupon bond. Sandhill needs to raise $1 million.

What will be the price of an 9 percent coupon bond? (Round answer to 2 decimal places, e.g 15.25.)

Bond value:

How many 9 percent coupon bonds would have to be issued? (Round answer to 0 decimal places, e.g 5,275.)

Number of bonds issued:

What will be the price of a zero coupon bond? (Round answer to 2 decimal places, e.g 15.25.)

Price of a zero coupon bond:

How many zero coupon bonds will have to be issued? (Round answer to 0 decimal places, e.g 5,275.)

Number of bonds issued:

Comments:

I'm confused as to how to arrive at the answers for each section .