Question

Blanche Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1000 and their current market price is $1040.35. However, Blanche Inc. may call the bonds in eight years at a call price of $1060. What are the YTM and the yield to call (YTC) on Blanche Inc.'s bonds?

                               Value

YTM                      a. 9.89%    b. 8.55%   c. 7.83%   d. 7.93%

YTC                      a. 7.93%    b. 7.36%   c. 8.82%   d. 7.83%

If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blanche Inc.'s bonds?

a. 5 years

b. 8 years

c. 13 years

d. 18 years

If Blanche Inc. issued new bonds today, what coupon rate must the bonds have to be issued at par?

a. 7.36%

b. 8.55%

c. 7.93%

d. 7.83%

Answer 1