A(n) 8.5

8.5%, 25-year bond has a par value of$1,000 and a call price of $1 comma 050

1,050. (The bond's first call date is in 5years.) Coupon payments are made semiannually(so use semiannual compounding whereappropriate).

a. Find the currentyield, YTM, and YTC on thisissue, given that it is currently being priced in the market at $ 1 comma 175.

$1,175. Which of these 3 yields is thehighest? Which is thelowest? Which yield would you use to value thisbond? Explain.

b. Repeat the 3 calculationsabove, given that the bond is being priced at $825

825. Now which yield is thehighest? Which is thelowest? Which yield would you use to value thisbond? Explain.

a. If the bond is priced at $1 comma 175

1,175, the current yield is

nothing

%. (Round to two decimalplaces.)

The annualyield-to-maturity with semiannual compounding is

nothing

%. (Round to two decimalplaces.)

The annualyield-to-call with semiannual compounding is

nothing

%. (Round to two decimalplaces.)

Which of these 3 yields is thehighest? Which is thelowest?(Select from thedrop-down menus.)

Yield-to-maturity

Yield-to-call

Current yield

is thehighest, while

yield-to-maturity

yield-to-call

current yield

is the lowest.

Which yield would you use to value thisbond?(Select the best answerbelow.)

A.

Theyield-to-call because convention is to use the lower more conservative measure of yield.

B.

Theyield-to-maturity is always used.

C.

Itdoesn't matter which yield you use.

D.

Theyield-to-maturity because the bonds may not be called.

b. If the bond is priced at $825

825, the current yield is

nothing

%. (Round to two decimalplaces.)

The annualyield-to-maturity with semiannual compounding is

nothing

%. (Round to two decimalplaces.)

The annualyield-to-call with semiannual compounding is

nothing

%. (Round to two decimalplaces.)

Which of these 3 yields is thehighest? Which is thelowest?(Select from thedrop-down menus.)

Yield-to-maturity

Current yield

Yield-to-call

is thehighest, while

yield-to-maturity

yield-to-call

current yield

is the lowest.

Which yield would you use to value thisbond?(Select the best answerbelow.)

A.

Itdoesn't matter which yield you use.

B.

Theyield-to-maturity because the bonds may not be called.

C.

Theyield-to-maturity is always used.

D.

Theyield-to-maturity because convention is to use the lower ofyield-to-maturity oryield-to-call for bonds selling at a discount.

Click to select your answer(s).