A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5

Question:

A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has just been issued.)

a. What is the bond's yield to maturity?

b. What is the bond's current yield?

c. What is the bond's capital gain or loss yield?

d. What is the bond's yield to call?

e. How would the price of the bond be affected by a change in the going market interest rates?

f. Now assume the date is October 25, 2013. Assume further that a 12%, 10-year bond was issued on July 1, 2013, pays interest semiannually (on January 1 and July 1), and sells for $1,100. Use your spreadsheet to find the bond's yield.

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,...