What is a sinking fund provision

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1. ABC has $1,000 face value bonds outstanding. These bonds pay interest semi-annually, mature in 10 years, and have a 7.5 percent coupon. The current price is quoted at 99.59 percent of par value. What is the yield to maturity? What is the current yield?

2. Refer to 1 above. Suppose the bonds are callable in 5 years at 105 percent of par value, what is the yield-to-call?

3. ABC's bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 12 years. What is the yield to maturity? What is the current yield?

4. Refer to 1 above. Suppose the bonds are callable in 5 years at 110 percent of par value, what is the yield-to-call?

5. When is a company likely to make a call - when the interest rates go up or go down? why?

6. What is a sinking fund provision? 

Reference no: EM13972453

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