Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 7.80% yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's yield to call?
Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 7.80% yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's yield to call?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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![Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual
payments, and a $1,000 par value. The bond has a 7.80% yield to maturity, but it can be called in 6 years at a
price of $1,045. What is the bond's yield to call?
Hint: Calculate the bond's price based on the YTM, and then use that price to find the YTC.
Your answer should be between 4.08 and 10.64, rounded to 2 decimal places, with no special characters.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F50061f72-d587-4549-9904-89206beea343%2Fa1ab7086-cc64-42a7-8215-72936129fe31%2F9tmbmuj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual
payments, and a $1,000 par value. The bond has a 7.80% yield to maturity, but it can be called in 6 years at a
price of $1,045. What is the bond's yield to call?
Hint: Calculate the bond's price based on the YTM, and then use that price to find the YTC.
Your answer should be between 4.08 and 10.64, rounded to 2 decimal places, with no special characters.
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