A 10%, 25-year bond has a par value of $1,000 and a call price of $1,075. (The

Question:

A 10%, 25-year bond has a of $1,000 and a call price of $1,075. (The bond’s first call date is in 5 years.) payments are made semiannually.
a. Find the current yield, YTM, and YTC on this issue, given that it is currently being priced in the market at $1,200. Which of these 3 yields is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
b. Repeat the 3 calculations above, given that the bond is being priced at $850. Now which yield is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...