Question: 7 . Consider the following bond . Coupon rate = 1 196 Maturity = 10 YEARS Par value = 51, 000 First par call in

7 . Consider the following bond . Coupon rate = 1

7 . Consider the following bond . Coupon rate = 1 196 Maturity = 10 YEARS Par value = 51, 000 First par call in 13 Years Only put date in five years and putable at parvalue Suppose that the market price for this bond $1. 169. ( a) Show that the vield to maturity for this bond is 9. 07 7%/} . First of all, we could compute the internal return based upon the cash flows if the bond is held to Maturity . WE would get 4. 5365%. For a semiannual pay bond, doubling the periodic interest rate ` ) gives the wield to maturity on a bond - Equivalent basis . Taking 4. 5365%'6 times two GIVES US a wield to maturity equal to 9. 07 796

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