A six-year bond with par value of $4,000 has an annual coupon rate of 7%. It...
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A six-year bond with par value of $4,000 has an annual coupon rate of 7%. It was purchased for $4,400 and may be called at m = 3, 4, 5, or 6. Its redemption value is $ 4,000. The call premiums are $250 in year 3, $240 in year 4, $230 in year 5 and $0 in year 6. [a] What is the yield to the investor in each case? [b] Calculate the call premium at each call date by using the constant yield rate 5.028% and varying the term of the bond. A six-year bond with par value of $4,000 has an annual coupon rate of 7%. It was purchased for $4,400 and may be called at m = 3, 4, 5, or 6. Its redemption value is $ 4,000. The call premiums are $250 in year 3, $240 in year 4, $230 in year 5 and $0 in year 6. [a] What is the yield to the investor in each case? [b] Calculate the call premium at each call date by using the constant yield rate 5.028% and varying the term of the bond.
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To calculate the yield to the investor in each case we need to consider the present value of the fut... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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