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6-1 ABC has issued 7.25 percent debentures (with a $1,000 denomination) that will mature on...

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Accounting

6-1 ABC has issued 7.25 percent debentures (with a $1,000 denomination) that will mature on July 15, 2036. Assume that interest is paid and compounded semi-annually. If an investor purchased the bond for $1,050 on July 15, 2016:

Determine the bonds yield-to-maturity.

Explain why an investor would be willing to pay $1,025 for a bond that is going to be worth only $1,000 at maturity.

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