Question

1. What is the yield to maturity for a $1,000 par, 25 year, 9% coupon bond with annual payments, callable in 2 years for $1,100 that sells for $900?

A. 20.1%

B. 8.6%

C. 18.6%

D. 10.1%

2. What is the yield to call for a $1,000 par, 25 year, 9% coupon bond with annual payments, callable in 2 years for $1,100 that sells for $900?

A. 8.6%

B. 20.1%

C. 18.6%

D. 10.1%

Answer 1

Calculate the yield to maturity as follows:

Therefore, the yield to maturity is 10.1%.

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Calculate the yield to call as follows:

Therefore, the yield to call is 20.1%.