Types of fixed income securities, Corporate Finance

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Question:

i) Compare and contrast the various types of fixed income securities.

ii) ‘A new issue of callable bonds will generally carry a higher interest rate than a comparable issue of uncallable bonds'.

iii) ‘As any investment, the price of a bond is simply the present value of all its future cash flows' Discuss using an illustrative example.

iv) Assuming all maturities are exact. You observe that a Boops & Co, 7 1/8% 4 year, semi-annual coupon bond trading at 102.347 percent of par. The bond is callable at 101 in two years and is putable at 100 in two years.

a) What the current yield?

b) What is the yield to maturity?

c) What is the yield to call?


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