Compute the more appropriate yield on the bond

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Reference no: EM132171860

Suppose a corporate bond issued by a BB-rated firm with a par value of $100, a maturity of 8 years, a 6% coupon, and is callable in two years at a price of $102 per $100 face value. The bond currently trades for $103.50.

A) Compute the more appropriate yield on the bond: either yield to maturity (YTM) or yield to call (YTC). Show your work.

B) Consider a different bond issued by a BB-rated firm with a par value of $100, a maturity of 8 years, and a 6% coupon. This bond is not callable. Do you think this bond trades for a price above or below $103.50. Why?

Reference no: EM132171860

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