interest payments on a semiannual basis,
Doisneau 22-year bonds have an annual coupon interest of 8 percent, make interest payments on a semiannual basis, and have a $1, 000 par value. If the bonds are trading with a market’s required yield to maturity of 16 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?
a. If the bonds are trading with a yield to maturity of 16
then
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A.
the bonds should be selling at a premium
because the bond’s coupon rate is greater
than the yield to maturity of similar bonds.
B.
there is not enough information to judge the value of the bonds.
C.
the bonds should be selling at par because the bond’s coupon rate is equal to the yield to maturity of similar bonds.
D.
the bonds should be selling at a discount
because the bond’s coupon rate is less than the yield to maturity of similar bonds.
