Question 1/[a]. Consider some bonds with one annual coupon payment of 7.25%. Thebonds have a par value of $1,000, a current price of $1,125, andthey will mature in 13 years. What is the yield to maturity onthese bonds? [a]. Couponrate 7.25% N 13 PV =Price $1,125 PMT $72.50 FV =Par $1,000 I/YR 5.85% = YTM 2/ [b]. Sadik Inc.'s bonds currently sell for $1,280 and have a parvalue of $1,000. They pay a $135 annual coupon and have a 15-yearmaturity, but they can be called in 5 years at $1,050. What istheir yield to call (YTC)? Answer 7.45%

Question 1/[a]. Consider some bonds with one annual coupon payment of 7.25%. Thebonds have a par value of $1,000, a current price of $1,125, andthey will mature in 13 years. What is the yield to maturity onthese bonds? [a]. Couponrate 7.25% N 13 PV =Price $1,125 PMT $72.50 FV =Par $1,000 I/YR 5.85% = YTM 2/ [b]. Sadik Inc.'s bonds currently sell for $1,280 and have a parvalue of $1,000. They pay a $135 annual coupon and have a 15-yearmaturity, but they can be called in 5 years at $1,050. What istheir yield to call (YTC)? Answer 7.45%

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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Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
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[b].	Sadik Inc.'s bonds currently sell for $1,280 and have a parvalue of $1,000. They pay a $135 annual coupon and have a 15-yearmaturity, but they can be called in 5 years at $1,050. What istheir yield to call (YTC)?