1. A corporate bond is quoted at $955 based on $1,000 par. Today is 12/31/2021. Assume that transaction date and settlement date is the same. The bond has 30-year maturity. The bond also has a callable option. The option calls for retirement of the bond in 10 years at $1,010 par instead of $1,000 par. The coupon rate is 12%. Which yield will a bondholder likely to get: yield to maturity or yield to call? Assume semi-annual coupons.

Yield to call as yield to call is higher than yield to maturity

Yield to call as yield to call is lower than yield to maturity

Yield to maturity as yield to maturity is lower than yield to call

Yield to maturity as yield to maturity is higher than yield to call

1. The market price of stock AA is $55.15. Your analysis suggests that the intrinsic value of stock AA is $100.15. Will you be interested in investing in Stock AA?

No. I will not be interested in buying stock AA today with the expectation that the market price will increase to match the intrinsic value in the future

Yes. I will be interested in buying stock AA today with the expectation that the market price will drop to match the intrinsic value in the future

Yes. I will be interested in buying stock AA today with the expectation that the market price will increase to match the intrinsic value in the future

No. I will not be interested in buying stock AA today with the expectation that the market price will drop to match the intrinsic value in the future

1. An 12% coupon bond is selling for $1125.35 with 3 years until maturity. The coupons are annual payments. The interest rates in the next 3 years will be 9%, 7%, and 8% respectively. Par is $1,000. What is the realized compound yield?

 

Answer rating: 100% (QA)

Yield to call as yield to call is higher than yield to maturity Explanation Since the bond is callable in 10 years at 1010 we need to calculate the yi... View the full answer