Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 1. a corporate bond has 20 years to maturity, par

1. A corporate bond has 20 years to maturity, par value of $1,000, and pays interest...

Free

80.2K

Verified Solution

Question

Finance

1. A corporate bond has 20 years to maturity, par value of$1,000, and pays interest semiannually. The quoted coupon rate is8%, and the bond is priced at $950. The bond is callable in 10years at 105% of par.

A. What is the bond's yield to call?

B. What is the bond's yield to maturity?

Answer & Explanation Solved by verified expert
4.1 Ratings (760 Votes)

A

                  K = Time to callx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTC/2)^k]     +   Call Price/(1 + YTC/2)^Time to callx2
                   k=1
                  K =10x2
950 =? [(8*1000/200)/(1 + YTC/200)^k]     +   1050/(1 + YTC/200)^10x2
                   k=1
YTC% = 9.09

B

                  K = Nx2
Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =20x2
950 =? [(8*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^20x2
                   k=1
YTM% = 8.53

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

1. A corporate bond has 20 years to maturity, par value of$1,000, and pays interest semiannually. The quoted coupon rate is8%, and the bond is priced at $950. The bond is callable in 10years at 105% of par.A. What is the bond's yield to call?B. What is the bond's yield to maturity?

Other questions asked by students

Q

Briefly explain some of the educacional trends of the twuenty- firt century

Psychology
Q

A 22-cm-diameter cylinder that is 43 cm long contains 44 g of oxygen gas at 20∘C What...

Physics
Q

The impulse imported by an electromagnetic pulse of energy 1 5 10 2 joule when...

Physics
Q

Professor Dingbat teaches two sections of economics class He gave an exam to both sections...

Basic Math
Q

For a certain endangered species, the goal is to have 900 breeding adults in the...

Basic Math
Q

Find the derivative of the function 7 g x g x 7 arccos

Calculus
Q

Problem 12-4A (Part Level Submission) Heidebrecht Design acquired 30% of the outstanding common stock of...

Accounting
Q

Accounting
Q

Fulvias spouse died on February 14, Year 1, leaving Fulvia to fully support a dependent...

Accounting
Q

Comment on the following items relative to tax planning strategies of a fiduciary entity. ...

Accounting
Q

Advertising expenses are usually wasteful, with no guarantee of enhanced sales or higher loyalty from...

Accounting
Q

1- Emmanuel thrives when he is assigned to projects that are mostly self-directed. He can...

Accounting