Question: Q: Is this bond likely to be called? What return are investors likely to earn on this bond? Do call provisions make bonds more or

Q: Is this bond likely to be called? What return are

Q: Is this bond likely to be called? What return are investors likely to earn on this bond? Do call provisions make bonds more or less risky? explain

A bond: 10 -year, 10 percent, semiannual coupon bond with a par value of $1,000 is currently selling for $1,135.90, producing a nominal yield to maturity of 8 percent. However, the bond can be called after 5 years for a price of $1,050. (Assume that the bond has just been issued.) Annual YTM =8% Current Yield =8.8% Cap Loss =0.8% Annual YTC =6.75%

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