An analyst observes a GUI & Co 6.25%, 5 year semi-annual pay bond trading at 104.764%...

An analyst observes a GUI & Co 6.25%, 5 year semi-annual pay bond trading at 104.764% of par (where par = $1,000). The bond is callable at 102 in 3 years and putable at 99 in 3 years. #3: what are the bond's current yield and yield to maturity? #4. What's the bond's yield to call and put? EC: Do you expect that the bond would be called and/or put? Why or Why not?

Expert Solution

coupon payment	10006.25%1/2	31.25
Period	5*2	10
market value	1000*104.764%	1047.64
par value		1000

Current Yield	coupon payment/current market price	(31.25*2)/1047.64	5.97%
YTM- semiannual =Using rate function in MS excel	rate(nper,pmt,pv,fv,type) nper =10 pmt = 31.25 pv =1047.64 fv =1000 type =0	RATE(10,31.25,-1047.64,1000,0)	2.58%
YTM annual	YTM semiannual*2	2.58*2	5.16

YTC- Semiannual = Using rate function in MS excel	rate(nper,pmt,pv,fv,type) nper =32 =6 pmt = 31.25 pv =1047.64 fv =1000102% =1020 type =0	RATE(6,31.25,-1047.64,1020,0)	2.57%
YTC annual	YTC- semiannual*2	2.57*2	5.14

Yield to put Semiannual = Using rate function in MS excel	rate(nper,pmt,pv,fv,type) nper =32 =6 pmt = 31.25 pv =1047.64 fv =100099% =999 type =0	RATE(6,31.25,-1047.64,999,0)	2.25%
Yield to put annual	Yield to put- semiannual*2	2.25*2	4.5

jeff jeffy answered 1 year ago

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