Gamma has just issued a five-year bond with an early redemption clause (early redemption price equal to par). The coupon rate is 7%. Early redemption will be possible on each coupon detachment date. The bond is currently trading at 105% of its $ 100 face value. What is the profitability at maturity of this bond (Yield to Maturity - YTM)? As well as profitability with exercise of the early repayment clause (Yield to Call - YTC)?

Answer rating: 100% (QA)

To calculate the yield to maturity YTM and yield to call YTC of the bond we need to gather the neces... View the full answer