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8. Bond yields 3 Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. A bond's yield to maturity (VT) refers to the rate of retum expected from a bond held until its maturity date. However, the YTM equals an investor's expected rate of return under certain assumptions. Which of the following is one of those assumptions? The probability of default is zero The bond is callable. Purple Whale Energy has 99 annual coupon bonds that are callable and have 18 years loft until maturity. The bonds have a por value of $1,000, and their current market price is $950.3. However, Purple Whale may call the bonds in eight years at a call price of $1,050: What are the YTM and the yield to call (YTC) on Purple Whale's bonds? Value YTM . YTC The current yield on the bond is If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Purple Whale's bonds? 0.8 years 5 years 0 18 years 10 years The probability of default is zero. The bond is callable Purple Whale Energy has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, Purple Whale may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Purple Whale's bonds? Value YTM YTC The current yield on the bond is If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Purple Whale's bonds? O 8 years O 5 years 18 years O 10 years If Purple Whale Energy issued new bonds today, what coupon rate must the bonds have to be issued at par? 7.83% 8.24% O 8.88% 9.59%