Masters Corp issues two bonds with 20 year maturities Both bonds are callable at $1,080 The first bond is issued at a deep discount with a coupon rate of 6 and a price of $460 to yield 14 4 The second bond is issued at par value with a coupon rate of 5 75 a What is the yield to maturity of the par bond (Round your answer to 2 decimal places ) Yield to maturity b If you expect rates to fall substantially in the next two years, which bond would you prefer to hold Bond with a coupon rate 5 75 Bond with a coupon rate 6

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Question: Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,080. The first bond is issued at a deep discount with a

Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,080. The first bond is issued at a deep discount with a coupon rate of 6% and a price of $460 to yield 14.4%. The second bond is issued at par value with a coupon rate of 5.75%.

a.	What is the yield to maturity of the par bond? (Round your answer to 2 decimal places.)

Yield to maturity

If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

	Bond with a coupon rate 5.75%
	Bond with a coupon rate 6%

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