q6-q7
(Related to Checkpoint 9.3) (Bond valuation) Doisneau 23-year bonds have an annual coupon interest of 15 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 13 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? a. If the bonds are trading with a yield to maturity of 13%, then (Select the best choice below.) A. there is not enough information to judge the value of the bonds. B. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. C. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar bonds. D. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds. b. The price of the bonds is S. (Round to the nearest cent.) (Yield to maturity) Fitzgerald's 15 -year bonds pay 8 percent interest annually on a $1,000 par value. If the bonds sell at $835, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference. a. The bond's yield to maturity if the bond pays interest annually is %. (Round to three decimal places.) b. The bond's yield to maturity if the bond paid interest semiannually would be %. (Round to three decimal places.) c. Based on the findings in parts a and b, which of the following statements is correct? (Select the best choice below.) A. Other things being equal, the YTM is higher for an annual bond than a semiannual bond if the bond is selling at a discount. B. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a discount. C. Other things being equal, the YTM is higher for a semiannual bond than an annul bond if the bond is selling at a discount. D. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a premium
