Find bond nominal yield to maturity

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Last year Krane, Inc. issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,200.

a. What are the bond's nominal yield to maturity and its nominal yield to call? Would aninvestor be more likely to earn the YTM or the YTC?

b. What is the current yield? Is this yield affected by whether the bond is likely to be called?(Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.)

c. What is the expected capital gains (or loss) yield for the coming year? Is this yield dependenton whether the bond is expected to be called? Explain your answer.

Reference no: EM133068995

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