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 9.5% on a face value of $1,000. Currently, the bonds are selling for $872.
a.If you required return is 11% for bonds in this risk class, what is the highest price you would be willing to pay? (Hint: Use the PV function)
b.What is the yield to maturity on these bonds if you purchase them at the current price? (Hint: Use the RATE function)
c.If the bonds can be called in three years with a call premium of 4% of the face value, what is the yield to call on these bonds?
