Sofia purchases a $5,000 7% eight-year par-value bond with annual coupons. If held to maturity, her yield is 6.9%. The bond is callabl at the end of two years for $5,300 and at the end of years five, six, and seven for $5,200. (a) Find Sofia's minimal yield for the period she holds the bond. (Round your answer to two decimal places.) % (b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.1% savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons ar not reinvested. Round your answer to two decimal places.) %
Sofia purchases a $5,000 7% eight-year par-value bond with annual coupons. If held to maturity, her yield is 6.9%. The bond is callabl at the end of two years for $5,300 and at the end of years five, six, and seven for $5,200. (a) Find Sofia's minimal yield for the period she holds the bond. (Round your answer to two decimal places.) % (b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.1% savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons ar not reinvested. Round your answer to two decimal places.) %
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:Sofia purchases a $5,000 7% eight-year par-value bond with annual coupons. If held to maturity, her yield is 6.9%. The bond is callable
at the end of two years for $5,300 and at the end of years five, six, and seven for $5,200.
(a) Find Sofia's minimal yield for the period she holds the bond. (Round your answer to two decimal places.)
%
(b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.1%
savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons are
not reinvested. Round your answer to two decimal places.)
%
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