Question
In: Finance
Jerome Corporation’s bonds have 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000...
Jerome Corporation’s bonds have 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000 par value. The bond has a 6.00% nominal yield to maturity, but it can be called in 6 years at a price of $1,050. What is the bond’s nominal yield to call?
a.5.27%
b.5.54%
c.4.34%
d.6.10%
e.5.81%
Solutions
Expert Solution
Calculate the current price of the bond as follows:
Price $1,269.506069.
------------------------------------------------------------------------------------------------------------------
Calculate the yield to maturity as follows:
Semiannual rate is 2.16926%
Yield to call is 2.16926%*2 4.34%.
Therefore, Option C is correct.
jeff jeffy answered 1 year agoRelated Solutions
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