Assume that everything stated in Problem 11 remains the same except that the bonds are not perpetual Instead, they have a $1,000 par value and mature in 10 years In problem The Great Northern Specific Railway has noncallable, perpetual bonds outstanding When originally issued, the perpetual bonds s...

Trying a 4 percent semiannual YTM as a starting point for a trialanderror appro ...

Assume that everything stated in Problem 11 remains the same except that the bonds are not perpetual.

Question:

Assume that everything stated in Problem 11 remains the same except that the bonds are not perpetual. Instead, they have a $1,000 and mature in 10 years.
In problem
The Great Northern Specific Railway has noncallable, perpetual bonds outstanding. When originally issued, the perpetual bonds sold for $955 per bond; today (January 1) their current market price is $1,120 per bond. The company pays a semiannual interest payment of $45 per bond on June 30 and December 31 each year.
a. Determine the implied semiannual yield to (YTM) on these bonds. {Tip: If all you have to work with are present value tables, you can still determine an approximation of the semiannual YTM by making use of a trial-and-error procedure coupled with interpolation. In fact, the answer to Problem 11, Part (a) - rounded to the nearest percent - gives you a good starting point for a trial-and-error approach.)
b. Using your answer to Part (a), what is the (nominal annual) YTM on these bonds? The (effective annual) YTM on these bonds? Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...