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A 20-year maturity, 6.5% coupon bond paying coupons semiannually is callable in five years at a call price of $1,010. The bond currently sells at a yield to maturity of 6.00% (3.00 % per half-year).

A 20-year maturity, 6.5% coupon bond paying coupons semiannually is callable in five years at a call price of $1,010. The bond currently sells at a yield to maturity of 6.00% (3.00 % per half-year).

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A 20-year maturity, 6.5% coupon bond paying coupons semiannually is callable in five years at a call price of $1,010. The bond currently sells at a yield to maturity of 6.00% (3.00% per half-year). a. What is the yield to call annually? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 5.345% b. What is the yield to call annually if the call price is only $960? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 4.475 % c. What is the yield to call annually if the call price is $1,010, but the bond can be called in two years instead of five years? (Negative amounts should be shown with a minus sign. Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 3.952%
Transcribed Image Text:A 20-year maturity, 6.5% coupon bond paying coupons semiannually is callable in five years at a call price of $1,010. The bond currently sells at a yield to maturity of 6.00% (3.00% per half-year). a. What is the yield to call annually? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 5.345% b. What is the yield to call annually if the call price is only $960? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 4.475 % c. What is the yield to call annually if the call price is $1,010, but the bond can be called in two years instead of five years? (Negative amounts should be shown with a minus sign. Do not round intermediate calculations. Round your answer to 3 decimal places.) Yield to call 3.952%
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