Computation of yield to maturity at a current market

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Computation of yield to maturity at a current market price of bond

Heymann company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1000 par value and a coupon rate of 9%.

a) What is the yield to maturity at a current market price of (1) $829 or (2) $1104?

b) Would you pay $829 for each bond if you thought that a "fair" market interest rate for such bonds was 12%- that is if r=12%? Explain your answer

Reference no: EM1314795

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