RTE Inc has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000 and their current market price is $1,130.35. However RTE might call the bonds in 8 years at a call price of $1,060.
1. What is the TYM?
a) 8.55%
b) 7.09%
c) 9.59%
d) 7.64%
2. What is the YTC?
a) 7.36%
b) 9.59%
c) 7.64%
d) 6.47%
3. If interest rates are expected to remain constant, what is the best estimate of the remaining life left for RTE lncs bonds?
a) 8 yrs
b) 5 yrs
c) 13 yrs
d) 10 yrs
4. If RTE issued new bonds today, what coupon rate must have to be issued at par? _____ -options:
a) 8.32%
b) 7.64%
c) 7.09%
d) 9.59%