Reindeer Corp. plans to issue bonds to expand operations. The bonds will have a par value of $1,000, a 10-year maturity, and a coupon interest rate of 9%, paid semiannually. Current market conditions are such that the bonds will be sold to net $937.79. The yield-to-maturity of these bonds is 10.65%.

Question

Quizplus · Accepted Answer

The yield-to-maturity of these bonds cannot be 10.65% if they are sold to net $937.79, as this implies a yield higher than 10.65%.