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6-2 Suppose Pioneering Medical has an outstanding bond with a yield to maturity (YTM) equal to 6.5 percent and a yield to call (YTC) equal

6-2

Suppose Pioneering Medical has an outstanding bond with a yield to maturity (YTM) equal to 6.5 percent and a yield to call (YTC) equal to 7.0 percent. Explain the meanings of these two yields to investors. If Pioneering plans to issue a new bond with similar characteristics as its outstanding bond, to which rate, YTM or YTC, should it set the coupon rate on the new bond? Explain your answer. (LO 6-4)

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