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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
A 10%, 25-year bond has a par value of $1000 and a call price of $1075. (The bond’s first call date is in five years.) Coupon payments are made semi-annually (so use semi-annual compounding where appropriate).
a. Find the current yield, YTM and YTC on this issue, given that it is currently being priced in the market at $1200. Which of these three yields is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
b. Repeat the three calculations above, given that the bond is being priced at $850. Now which yield is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
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