What will be the capital gain on each bond

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The yield to maturity on two 10-year maturity bonds currently is 7%. Each bond has a call price of $1,100. One bond has a coupon rate of 6% and the other 8%.

Assume for simplicity that bonds are called as soon as the present value of their remaining payments exceeds their call price.

What will be the capital gain on each bond if the market interest rate suddenly falls to 6%. A 20-year maturity 9% coupon bond paying coupons semiannually is callable in 5 years at a call price of $1050.

The bond currently sells at a yield to maturity of 8%. What is the yield to call?

Reference no: EM132063814

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