Question 1

A. ALLSTON Corporations bonds have 15 years remaining to maturity and these bonds have $1,000 par value and a coupon rate of 10%. The bonds have a yield to maturity of 8%: What is the current market price of those bonds?

i. if interest is paid annually (6 marks)

ii. if interest is paid semi-annually (7 marks)

B. KENNEDY bonds have 14 years to maturity and have a par value of $1,000 and coupon rate of 12%. If the bonds sell for $850 and the coupon interest rate is 10%; what is their yield to maturity?