It is now January 1, 2009, and you are considering the purchase of an outstanding bond that was issued on January 1, 2007 It has a 9 5 annual coupon and had a 30 year original maturity (It matures on December 31, 2036 ) There is 5 years of call protection (until December 31, 2011), after which time...

a Yield to maturity YTM With a financial calculator input N 28 PV 1165 ...

It is now January 1, 2009, and you are considering the purchase of an outstanding bond that

Question:

It is now January 1, 2009, and you are considering the purchase of an outstanding bond that was issued on January 1, 2007. It has a 9.5% annual and had a 30-year original (It matures on December 31, 2036.) There is 5 years of call protection (until December 31, 2011), after which time it can be called at 109—that is, at 109% of par, or $1,090. Interest rates have declined since it was issued; and it is now selling at 116.575% of par, or $1,165.75.
a. What is the yield to What is the yield to call?
b. If you bought this bond, which return would you actually earn? Explain your reasoning.
c. Suppose the bond had been selling at a discount rather than a premium. Would the yield to have been the most likely return, or would the yield to call have been most likely?

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... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...