Problem:

Air products and Chemicals sold $125 million of notes in Nov. of 2003 with a December 1. 2010, maturity date. The bonds were sold at a discount of $99.721 per $100 with a coupon rate of 4.125%. Answer the following:

Required:

Question 1: Assume that bonds with a face value if $10,000 were purchased at the time of issue, semiannual coupon payments, and that the bonds are kept until maturity. What is the yield to maturity for the investment?

Question2: Assume that it is known at time zero that the bonds could be sold for $10,350.50 after the second coupon payment in year 5. What is the yield until the time of the sale?

Question 3: Consider the purchaser of the bond at the end of year 5 (for $10,350.50). If he or she retains the bond through its maturity, what is the yield?

Explain in detail and provide all steps.