Find the yield rate if the issuer chooses a redemption date

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Reference no: EM131910107

A 10% bond with semi-annual coupons and with face and redemption amount 1,000,000 is issued with the condition that redemption can take place on any coupon date between 12 and 15 years from the issue date.

Find the price paid by an investor wishing a minimum yield of (i) i(2) =. 12, and (ii) i(2) =.08.

Suppose the investor pays the maximum of all prices for the range of redemption dates.

Find the yield rate if the issuer chooses a redemption date corresponding to the minimum price in each of cases (i) and (ii) of part (a).

Suppose the investor pays the minimum of all prices for the range of redemption dates.

Find the yield rate if the issuer chooses a redemption date corresponding to the maximum price in each of cases (i) and (ii) of part (a).

Suppose the investor pays 850,000 for the bond and holds the bond until it is called. Find the minimum yield that the investor will obtain.

Reference no: EM131910107

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