Total return of the bond in dollars

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A 7.5 percent coupon bond with 30 years left to maturity is prices to offer a 6.5 percent yield to maturity. After one year, the issuer announce that the bond will be called in 5 years (including the year that has passed) at the price of $1200 and you believe the yield to call turns out to be 8 percent, if this occurs what's the current bond price (bond price at time point year 0)? What's the bond price in one year (bond price at time point year 1)? What's the total return of the bond in dollars if you buy the bond now and sell it in one year? The coupon will be paid semiannually

Hint: total return of the bond in dollars= bond price in one year- current bond price+ coupon received in one year.

Reference no: EM131044547

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