The Brownstone Corporation’s bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%.
a. What is the yield to maturity at a current market price of:
(1) $829 or (2) $1,104?
b. Would you pay $829 for one of these bonds if you thought that the appropriate rate of interest was 12%—that is, if rd 12%?
Explain your answer and show process,