Question
In: Finance
A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in five years at a...
A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in five years at a call price of $1,020. The bond currently sells for $1,059.34.
a) What are the yield to maturity and the yield to call of the bond?
b) What would be the yield to call annually if the call price were only $970?
c) What would be the yield to call annually if the call price were $1,020, but the bond could be called in two years instead of five years?
d) Sketch the price of the bond as a function of the interest rate.
Solutions
Expert Solution
| a | YTM | 7.50% |
| YTC | 6.92% | |
| b | YTC | 6.08% |
| c | YTC | 5.77% |
| d | Price | Interest rate |
| $1,463.63 | 5% | |
| $1,276.76 | 6% | |
| $1,124.72 | 7% | |
| $1,000.00 | 8% | |
| $896.81 | 9% | |
| $810.71 | 10% | |
| $738.25 | 11% |
WORKINGS
jeff jeffy answered 1 year agoRelated Solutions
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