A(n) 8.0 ?%, ?25-year bond has a par value of? $1,000 and a call price of...

A(n) 8.0 ?%, ?25-year bond has a par value of? $1,000 and a call price of ?$1,100 . ?(The bond's first call date is in 5? years.) Coupon payments are made semiannually? (so use semiannual compounding where? appropriate).

a. Find the current? yield, YTM, and YTC on this? issue, given that it is currently being priced in the market at $ 1,225. Which of these 3 yields is the? highest? Which is the? lowest? Which yield would you use to value this? bond? Explain.

b. Repeat the 3 calculations? above, given that the bond is being priced at ?$875 . Now which yield is the? highest? Which is the? lowest? Which yield would you use to value this? bond? Explain.

a. If the bond is priced at ?$1,225 ?, the current yield is ___ ?%. ?(Round to two decimal? places.) The annual? yield-to-maturity with semiannual compounding is ___ ?%. ?(Round to two decimal? places.)

The annual? yield-to-call with semiannual compounding is ____ ?%. ?(Round to two decimal? places.) Which of these 3 yields is the? highest? Which is the? lowest???

Which yield would you use to value this? bond???(Select the best answer? below.)

A. The? yield-to-maturity because the bonds may not be called.

B. The? yield-to-maturity is always used.

C. It? doesn't matter which yield you use.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

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