Demonstrate what is the yield to maturity on the bonds

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Grace executives have now decided to introduce an organic line of products, starting with juice and blended juice. This new line will become the company's highest strategic priority for the next two years. The introduction of certified organic products will be expensive. Preliminary estimates indicate that Grace will need to invest $80 million in production and processing facilities. The company hopes to finance the expansion by using $30 million of its own liquid assets and $50 million in new debt in the form of bonds with a maturity of twenty years. Grace expects the bonds to receive a rating of Aa1 or better from Moody's.

Question 1: For all questions, assume a par value is $1,000 and semiannual bond interest payments. Grace has one outstanding bond issue with a coupon of 8% which will mature in five years. The bond now sells for $1,141.69. What is the yield to maturity on these bonds?

Reference no: EM132512636

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