Question
A 10% corporate bond with a face value of $10,000 was issued in May of 2006. At issue, the bond had 25 years to maturity
A 10% corporate bond with a face value of $10,000 was issued in May of 2006. At issue, the bond had 25 years to maturity and 10 years of call protection (first call at 104% of par). In May of 2016 (at the expiration of call protection) similar bonds trade to yield 8%. Compute the gain or loss per bond (expressed in PV terms) if the bonds are called immediately after their call protection has expired. Also, compute the Yield-to-Call as of May 2006 assuming the bond gets called at the expiration of its call protection. Hint: Do NOT use your calculators bond function.
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