Q.1 Cannon Corporation is selling a new issue of bonds to raise money to finance its new line of yogurt products. The bonds will pay a coupon rate of 5% and will mature in 15 years. The face value of the bonds is $1,000 each; interest is paid semi-annually.

The market rate of interest is currently 6% for similar bonds. What is the fair price for an investor to pay for one of these bonds?

The current market price is $920 for each bond. If you paid this price, what would be your yield-to-maturity?