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MeCue Inc.'s bonds currently sell for $1,045. They pay an $80 annual coupon, have a 10-year maturity, and a $1,000 par value, but they can be called in 4 years at $1,115. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) a. -2.06 p.p. b. -1.89 p.p. c. -1.77 p.p. d. -2.51 p.p. e, -1.15 p.p.

MeCue Inc.'s bonds currently sell for $1,045. They pay an $80 annual coupon, have a 10-year maturity, and a $1,000 par value, but they can be called in 4 years at $1,115. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) a. -2.06 p.p. b. -1.89 p.p. c. -1.77 p.p. d. -2.51 p.p. e, -1.15 p.p.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 15P
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MeCue Inc.'s bonds currently sell for $1,045. They pay an $80 annual coupon, have a 10-year maturity, and a $1,000 par value, but they can be called in 4 years at $1,115. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) a. -2.06 p.p. b. -1.89 p.p. c. -1.77 p.p. d. -2.51 p.p. e, -1.15 p.p.

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