The Lucky Co. bonds have 6 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 par value; and the coupon interest rate is 5 percent.

a.What is the yield to maturity at a current market bond price of (1) $900 or (2) $1,100? If you could not get the final answer, take a guess on whether the yield to maturity is greater or less than 10 percent. (Remember for every price, there is a ytm, so I am looking for two ytms corresponding to these two bond prices.)

b.Would you pay $1100 for one of these bonds if you thought that the appropriate rate of interest was 10 percent? Explain your answer.