9. What is the yield to call (YTC) of a 30-year 6% bond selling for $940? The call deferment period for the bond is 10 years. Call premium=30. [Hint: It means that your N=10*2=20, and your face value=1030]
9. What is the yield to call (YTC) of a 30-year 6% bond selling for $940? The call deferment period for the bond is 10 years. Call premium=30. [Hint: It means that your N=10*2=20, and your face value=1030]
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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![***YTC, YTM, and holding period yield they all refer to the r in
the formula:
P=C*[1-1/(1+r)^t]/r + F/(1+r)^t. They are just different
expressions under different circumstances.
9. What is the yield to call (YTC) of a 30-year 6% bond
selling for $940? The call deferment period for the bond is
10 years. Call premium=30.
[Hint: It means that your N=10*2=20, and your face
value=1030]
10. What is the yield to call (YTC) of a 20-year 8% bond
selling for $1030? The call deferment period for the bond is
5 years. Call premium=40.
[Hint: It means that your N=5*2=10, and your face
value=1040]
11. Still considering the same bond as question 10, suppose
you buy it today, but expect to sell it in 2 years at a
YTM=4%. That is, you expect the yield to maturity on this
bond to be 4% when you sell it in 2 years. What price do
you expect to sell it for? What is your expected holding
period yield if you buy it today and sell it at the expected
sell price?
12. What is the holding period yield on a 30-year 7% bond
that we buy for $1050. We sell the bond in 4 years for
$1090.
13. Suppose you bought a 20-year 8% bond for $1075. If you
sold the bond for $980 after holding it for 2 years, what
was your holding period yield?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbaae2dda-a252-496a-afa6-fe7a315ec7a1%2F8e605ad3-e8ce-4aa4-ba20-84e9456b9d63%2F13ntg9r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:***YTC, YTM, and holding period yield they all refer to the r in
the formula:
P=C*[1-1/(1+r)^t]/r + F/(1+r)^t. They are just different
expressions under different circumstances.
9. What is the yield to call (YTC) of a 30-year 6% bond
selling for $940? The call deferment period for the bond is
10 years. Call premium=30.
[Hint: It means that your N=10*2=20, and your face
value=1030]
10. What is the yield to call (YTC) of a 20-year 8% bond
selling for $1030? The call deferment period for the bond is
5 years. Call premium=40.
[Hint: It means that your N=5*2=10, and your face
value=1040]
11. Still considering the same bond as question 10, suppose
you buy it today, but expect to sell it in 2 years at a
YTM=4%. That is, you expect the yield to maturity on this
bond to be 4% when you sell it in 2 years. What price do
you expect to sell it for? What is your expected holding
period yield if you buy it today and sell it at the expected
sell price?
12. What is the holding period yield on a 30-year 7% bond
that we buy for $1050. We sell the bond in 4 years for
$1090.
13. Suppose you bought a 20-year 8% bond for $1075. If you
sold the bond for $980 after holding it for 2 years, what
was your holding period yield?
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