Question: Heymann firm bonds havefour (4) years left to maturity. Interest is paid yearly, and the bonds have a $1,000 par value and a coupon rate of 9%.
[A] Calculate the yield to maturity at a current market price of (a) $829 or (b) $1,104?
[B] Would you pay $829 for every bond if you thought that a “fair” market interest rate for such bonds was 12%-that is, if r d=12%? Explain your reasoning.