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A 20-year, 10%, *1,000 bond that pays interest half-yearly is redeemable (callable] in twelve years at a buy-back (call) price of 1,150. The bond's

A 20-year, 10%, *1,000 bond that pays interest half-yearly is redeemable (callable] in twelve years at a buy-back (call) price of 1,150. The bond's current yield-to-maturity is 9.50% annually. You are required to determine (i) the yield-to-call, (ii) the yield-to-call if the buy-back price is only 1,100, and (iii) the yield-to-call if instead of twelve years, the bond can be called in eight years, buy-back price being 1,150.

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SOLUTION To calculate the yieldtocall for the bond we need to find the interest rate at which the present value of the cash flows from the bond equals ... blur-text-image

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