(Related to Checkpoint 9.3)(Bond valuation) Doisneau

20-year

bonds have an annual coupon interest of

7

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?

Question content area bottom

Part 1

a. If the bonds are trading with a yield to maturity of

13%,

then (Select the best choice below.)

A.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 bonds should be selling at a

discount

because the bond's coupon rate is

less

than the yield to maturity of similar bonds.

C.

the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds.

D.

there is not enough information to judge the value of the bonds.

Part 2

b.The price of the bonds is

$enter your response here.

(Round to the nearest cent.)