Yield to maturity

Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.

1. Whatistheyieldtomaturityatacurrentmarketpriceof
   2. 1. $819?Roundyouranswertotwodecimalplaces.
   3. 2. $1,205?Roundyouranswertotwodecimalplaces.
2. Wouldyoupay$819foreachbondifyouthoughtthata"fair"marketinterestrateforsuchbondswas14%-thatis,ifrd=14%?
   2. a)Youwouldbuythebondaslongastheyieldtomaturityatthispriceisgreaterthanyourrequiredrateofreturn.
   3. b)Youwouldbuythebondaslongastheyieldtomaturityatthispriceislessthanyourrequiredrateofreturn.
   4. c) Youwouldbuythebondaslongastheyieldtomaturityatthispriceequalsyourrequiredrateofreturn.
   5. d) Youwouldnotbuythebondaslongastheyieldtomaturityatthispriceisgreaterthanyourrequiredrateofreturn.
   6. e) Youwouldnotbuythebondaslongastheyieldtomaturityatthispriceislessthanthecouponrateonthebond.