The owner is interested in investing some retained earnings in corporate bonds. She is considering the following:
o Bond A has a 7% annual coupon, matures in 12 years, and has a $1,000 face value.
o Bond B has a 9% annual coupon, matures in 12 years, and has a $1,000 face value.
o Bond C has an 11% annual coupon, matures in 12 years, and has a $1,000 face value.
Each bond has a yield to maturity of 9%.
a. Before calculating the prices of the bonds, identify whether each bond is trading at a premium, at a discount, or at par.
b. Calculate the price of each of the three bonds.
c. Calculate the current yield for each of the three bonds.
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