6. Bondyields

Consider the following case of Blue Moose Home Builders Inc.:

Blue Moose Home Builders Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,100.35. However, Blue Moose Home Builders Inc. may call the bonds in eight years at a call price of $1,060.

Blue Moose Home Builders Inc.s bonds have a yield-to-maturity (YTM) of7.93% and a yield-to-call (YTC) of .

If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blue Moose Home Builders Inc.s bonds?

10 years

18 years

8 years

5 years

If Blue Moose Home Builders Inc. issued new bonds today, what coupon rate must the bonds have to be issued at par?