The yield to maturity on two 10-year maturity bonds currently is 7%. Each bond has a call

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The yield to maturity on two 10-year maturity bonds currently is 7%. Each bond has a call price of $1,100. One bond has a coupon rate of 6%, the other 8%. Assume for simplicity that bonds are called as soon as the present value of their remaining payments exceeds their call price. What will be the capital gain on each bond if the market interest rate suddenly falls to 6%?

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Investments

ISBN: 9780073530703

9th Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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