What is the yield to maturity on bonds

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Problem: As an investor, you are considering an investment in the bonds of the Conifer Coal Company.  The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 6.5% on a face value of $1,000.  Currently, the bonds are selling for $912.

a. If you required return is 8% for bonds in this risk class, what is the highest price you would be willing to pay? Would you buy the bond?

b. What is the yield to maturity on these bonds if you purchase them at the current price?

c. If the bonds can be called in three years with a call premium of 5% of the face value, what is the yield to call on these bonds?

Reference no: EM132466477

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