A bond has a face value of $1000, a 10% coupon rate and four years to maturity. The bond makes annual interest payments. The bond was selling at $1035. (a) What is the bond 's yield to maturity? (b) If the bond can be called two years from now at a price of $1120, what is its yield-to-call?
A bond has a face value of $1000, a 10% coupon rate and four years to maturity. The bond makes annual interest payments. The bond was selling at $1035. (a) What is the bond 's yield to maturity? (b) If the bond can be called two years from now at a price of $1120, what is its yield-to-call?
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
Problem 1PS
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![A bond has a face value of $1000, a 10% coupon rate and four years to maturity.
The bond makes annual interest payments. The bond was selling at $1035.
(a) What is the bond 's yield to maturity?
(b) If the bond can be called two years from now at a price of $1120, what is its
yield-to-call?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9c861553-89e9-45d8-89ce-d21a23c253f9%2F4df09d57-c309-4f3c-9f97-724999bfca06%2F4i9sxy_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A bond has a face value of $1000, a 10% coupon rate and four years to maturity.
The bond makes annual interest payments. The bond was selling at $1035.
(a) What is the bond 's yield to maturity?
(b) If the bond can be called two years from now at a price of $1120, what is its
yield-to-call?
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Can you review the calculation for part 2 please
Price of bond= 100 x 1-1.13-20.13+11201.132=$1043.93
and
Price of bond=100 x 1-1.14-20.14+11201.142=$1026.47
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