Question

Smith 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 15 percent, are these premium or discount​ bonds? Explain your answer. What is the price of the​ bonds?

If the bonds are trading with a yield to maturity of 15%, then:

A. the bonds should be selling at par because the​ bond's coupon rate is equal to the yield to maturity of similar bonds.
B. the bonds should be selling at a premium because the​ bond's coupon rate is greater than the yield to maturity of similar bonds.

C. the bonds should be selling at a discount because the​ bond's coupon rate is less than the yield to maturity of similar bonds.

D. there is not enough information to judge the value of the bonds.

The price of the bonds is $_

Answer 1