What is the yield to maturity and what is the yield to call

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Reference no: EM131543834

Yield to call. It is now January 1, 2006, and you are considering the purchase of an outstanding bond that was issued on January 1, 2004. It has a 9.5% annual coupon and had a 30-year originality maturity. ( It matures on December 31, 2033) There was 5 years of call protection (until December 31, 2008), after which time it can be called at 109 (That is, at 109% of par, or $1090). Interest rates have declined since it was issued, and it is now selling at 116,575% of par, or $1165,75. a. What is the yield to maturity? What is the yield to call? b. If you bought the bond, which return do you think you would actually earn? explain your reasoning. c. Suppose the bond had been selling at a discount rather than a premium. Would the yield to maturity then have been the most likely actual return, or would the yield to call have been most likely?

Reference no: EM131543834

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