You plan to invest in Fixed income so you have decided that Corporate Bonds are appropriate for your investment needs. You find a bond that that matures in 10 years but can be called in 5 years. The Yield to Call equals 8.62% and coupon payments are 8.5%. Par value equals $1,000. Hint: If called, the holder receives Par plus a year of coupon payments. What is the most you should be willing to pay for each Bond? Enter your answer to the nearest penny.

You plan to invest in Fixed income so you have decided that Corporate Bonds are appropriate for your investment needs. You find a bond that that matures in 10 years but can be called in 5 years. The Yield to Call equals 8.62% and coupon payments are 8.5%. Par value equals $1,000. Hint: If called, the holder receives Par plus a year of coupon payments. What is the most you should be willing to pay for each Bond? Enter your answer to the nearest penny.

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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Similar questions

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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