Handy Corporation issued 20-year bonds 15 years ago when market interest rates were relatively high. The bonds have a coupon rate of 14.7%, semiannual payments, and a par value of $1,000.
a) Given current market interest rates and the risk of the company, investors require a return of 9% to invest in these bonds. What is the price of the bond?
b) Suppose the bond's closing price is 1218.75. What is the bond's current yield?
c) If you buy the bond at the above closing price, what is the bond's yield to maturity?