A bond with a face value of $1,000 matures in 9 years and has a 7% semi annual coupon. The bond currently sells for $846.
You would pay $846 for each bond if you think that a “fair” market interest rate (discount rate) for such bonds is ____. (Hint: find out what is the nominal yield to maturity first) (Please Show work and calculation which led to the solution of the problem)
a) 10.24%
b) 12.53%
c) 11.28%
d) 8.67%
e) 15.60%