Please please help me. ASAP.I will really upvote. Thanks You are pricing each of the followingcallable bonds to guarantee a minimumyield rate of i2) = 5% compoundedsemi-annually and want to do as fewcalculations as possible. Answer thequestions belowa)A 15-year $1000 bond withsemi-annual coupons paid at a nominalrate of 6% compounded semi-annuallyis callable at $1100 at the end of years5 to 15. Which redemption date wouldgive the highest yield when called at?Justify why.

Given, Callable amount = $1,100Face value = $1,000

Answered: a) A 15-year $1000 bond with…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 17E

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Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
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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a) A 15-year $1000 bond with semi-annual coupons paid at a nominal rate of 6% compounded semi-annually is callable at $1100 at the end of years 5 to 15. Which redemption date would give the highest yield when called at?