Question
Asked Dec 6, 2019
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  • A $1,000 4-year par value bond with a 5 percent annual coupon has a market price of $1,027.06 has a yield to maturity of 4.25 percent. The bond can be called at the end of each of the first three years with a yield to call of 4.26 percent in the first year, 4.27 percent in the second year, and 4.29 percent in the third year. What year would produce the yield to worst?

 

  1. First year
  2. Second year
  3. Third year
  4. Fourth year
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Expert Answer

Step 1

Yield-To-Worst:

It is the minimum yield that can be receive

Yield-To-Worst:

It is the minimum yield that can be received on the bond by the bondholder if the bond is callable. It is based on the assumption of worst case scenario. It can ...

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