Question
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 ...Get Instant Access to Expert-Tailored Solutions
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Introduction to Operations Research
Authors: Frederick S. Hillier, Gerald J. Lieberman
10th edition
978-0072535105, 72535105, 978-1259162985
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