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Lourdes Corporation's 13% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 15 years,...

Lourdes Corporation's 13% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 15 years, are callable 5 years from today at $1,025. They sell at a price of $1,284.95, and the yield curve is flat. Assume that interest rates are expected to remain at their current level.

  1. What is the best estimate of these bonds' remaining life?

It is now January 1, 2019, and you are considering the purchase of an outstanding bond that was issued on January 1, 2017. It has a 9.5% annual coupon and had a 30-year original maturity. (It matures on December 31, 2046.) There is 5 years of call protection (until December 31, 2021), after which time it can be called at 108—that is, at 108% of par, or $1,080. Interest rates have declined since it was issued, and it is now selling at 116.57% of par, or $1,165.70.

  1. What is the yield to maturity?

  2. What is the yield to call?

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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