Corporate bonds usually have a call feature embedded in their contract, this means that the company can call those bonds earlier than maturity. This also means the when you price a corporate bond you must calculate the YTM, if the bond is held to maturity, and the YTC, the yield up to the callable period of the bond. A Verizon bond is currently selling for $775 with 7% coupon and a 10 year maturity. Assume the par(face) value is $1,000. Since this corporate bond, it is also callable at 5 years for $1,075 face value. Calculate the YTM and then the YTC. use the approx YTM formula O Can not be determined with the information given. O YTM - 10.42%, YTC 14.62% O YTM = 10.42%, YTC = 5.30% O YTM - 8.80%, YTC - 7.69%
Corporate bonds usually have a call feature embedded in their contract, this means that the company can call those bonds earlier than maturity. This also means the when you price a corporate bond you must calculate the YTM, if the bond is held to maturity, and the YTC, the yield up to the callable period of the bond. A Verizon bond is currently selling for $775 with 7% coupon and a 10 year maturity. Assume the par(face) value is $1,000. Since this corporate bond, it is also callable at 5 years for $1,075 face value. Calculate the YTM and then the YTC. use the approx YTM formula O Can not be determined with the information given. O YTM - 10.42%, YTC 14.62% O YTM = 10.42%, YTC = 5.30% O YTM - 8.80%, YTC - 7.69%
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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Transcribed Image Text:Corporate bonds usually have a call feature embedded in their contract, this means that the company can call those bonds earlier than maturity. This also means the when
you price a corporate bond you must calculate the YTM, if the bond is held to maturity, and the YTC, the yield up to the callable period of the bond.
A Verizon bond is currently selling for $775 with 7% coupon and a 10 year maturity. Assume the par(face) value is $1,000. Since this corporate bond, it is also callable at 5
years for $1,075 face value.
Calculate the YTM and then the YTC. use the approx YTM formula
O Can not be determined with the information given.
O YTM = 10.42% , YTC = 14.62%
O YTM = 10.42%, YTC = 5.30%
O YTM = 8.80% , YTC - 7.69%
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