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A corporate bond is sold in primary market with a 20 year maturity, an 8.00 percent coupon rate paid annually, and is callable at year
- A corporate bond is sold in primary market with a 20 year maturity, an 8.00 percent coupon rate paid annually, and is callable at year 15 with a $1.25 call premium per $100 of par value. Joe buys the corporate bond with 12 years remaining to maturity at a price of $98.00 per $100 of par value.
- When Joe buys the bond, what is the bonds current yield? Explain your answer.
- When Joe buys the bond, what is the bonds yield to maturity? Explain your answer.
- When Joe buys the bond, what is the bonds yield to call? Explain your answer.
- Does the coupon rate, current yield, yield to maturity, or yield to call most accurately reflect the yield Joe will earn on the bond? Explain your answer.
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