On April 1, 2017, you will consider the purchase of an outstanding bond that was...
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On April 1, 2017, you will consider the purchase of an outstanding bond that was issued on April 1, 2015. It has a 9.5% annual coupon, paid semiannually, and has a 30 year original maturity, that is, matures March 31, 2045. There are five years of call protection, through March 31, 2020, at which time it can be called in at 110%. Interest rates have declined since it was issued, and it is now selling for 115.875% of its par value of $1,000.
1. What is the nominal YTM on this semiannual, 9.5% coupon bond? Show work
2. What is the nominal YTC on this semiannual, 9.5% coupon bond? Show work
3. If you decide to purchase the bond April 1, 2017, which return would you expect to earn, the YTM or YTC? Why??
4. What is the current yield, _________%, and is it a capital gain or capital loss. Circle gain or loss. Show work.
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