You are provided the following info about a bond that was issued 7 years ago. The bond has a par value of $1000, has 8 years until maturity, and carries a 10% coupon with interest being paid annually.
a) What is the bond price today if we assume a theoretical discount rate of 0%? Show the calculation process.
b) What is the yield to maturity if we assume the bond is currently selling for par value? Show the calculation process.
c) If the bond is yielding 12% per annum, is it trading at a premium or a discount? Why?
d) What is the current yield to maturity if we assume the bond is currently priced at $896.64 and you are additionally informed that coupons are paid semi-annually?