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# Yield to Maturity for the Heymann Company's Bonds

The Heymann Company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a \$1,000 par value; and the coupon interest rate is 9%.

a/ What is the yield to maturity at a current market price of (1) \$829 or (2) \$1,104?

b/ Would you pay \$829 for one of these bonds if you thought that the appropriate rate of interest was 12% - that is, if rd = 12%? Explain your answer

#### Solution Preview

a. What is the yield to maturity at a current market price of (1) \$829 or (2) \$1,104?

We need to calculate how much the bonds have been issued by using the formula as follows: -

where B is the issued price
C is the coupon payment
r is the discount or yield rate
n is the period

Because we need to find the yield to maturity, we need to replace the information given into the equation and calculate for the yield to ...

#### Solution Summary

This solution is comprised of a detailed explanation to find the yield to maturity for Heymann Company's bonds at different current market prices.

\$2.19