Dry Seal plans to issue bonds to expand operations.The bonds will have a face 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%.

Question

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The bond is being sold at a discount because the market yield is higher than the coupon rate. Therefore, the yield-to-maturity is higher than the coupon rate (10% vs 9%).

Dry Seal Plans to Issue Bonds to Expand Operations