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What is the ytm and ytc of bond

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Reference no: EM132799596

Suppose a firm issued 1,000 bonds with face value of $1,000 and maturity of 10 years. The bond has 8% coupon and a callable option that can be exercised after 7 years at a call price $1,000. Assume annual compounding.

(a) What is the YTM and YTC of this bond?

(b) Suppose after 7 years, the term structure changed and there exists enough demand for bonds with 5% interest rates. Should the firm do refinancing? If yes, what should be the refinancing strategy of the firm?

Reference no: EM132799596

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