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3) Dewey Cheetham & Howe Accounting firm is considering the purchase of a $1,000 New Haven Municipal Bond. The stated coupon rate is 6%,
3) Dewey Cheetham & Howe Accounting firm is considering the purchase of a $1,000 New Haven Municipal Bond. The stated coupon rate is 6%, paid biannually (2 times a year). The bond will mature in 17 years. The YTM for similar bonds is 4.5%. a) How much should the market price of the bond be? b) How much is the effective rate of YTM? c) For the current year, how much is the current yield? d) For the current year, how much is the capital gains yield? e) What should the market price be if the coupon were paid annually? f) If the current market price of the bond is $1090, find the YTM with the original biannual coupon. g) What is the Yield to Call if the bond is callable in 12 years at a 15% premium with the original price and biannual coupon? Use the price of the bond in part a.
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