Reference no: EM132663257
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may becalled in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bondhas just been issued.)
Problem a. What is the bond's yield to maturity?
Problem b. What is the bond's current yield?
Problem c. What is the bond's capital gain or loss yield?
Problem d. What is the bond's yield to call?
Problem e. How would the price of the bond be affected by a change in the going market interestrate? (Hint: Conduct a sensitivity analysis of price to changes in the going marketinterest rate for the bond. Assume that the bond will be called if and only if the goingrate of interest falls below the coupon rate. This is an oversimplification, but assumeit for purposes of this problem.)
Problem f. Now assume the date is October 25, 2017. Assume further that a 12%, 10-year bondwas issued on July 1, 2017, pays interest semiannually (on January 1 and July 1), andsells for $1,100. Use your spreadsheet to find the bond's yield
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