Problem:
Your boss has indicated that he would like your help in determining the value of a bond issue currently under review. The firm has bonds outstanding that have four (04) years remaining to maturity, a coupon interest rate of 9 percent paid annually, and a $1,000 par value.
Required:
Question 1: What is the yield to maturity on the bond issue if the current market price is $829?
Question 2: What is the yield to maturity on the bond issue if the current market price is $1,104?
Question 3: Would you be willing to buy one of these bonds for $829 if you required a 12 percent rate of return on the bonds issue? Explain your answer.
Note: Please provide reasons to support your answer.