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Alliance Health Plans issued a 12 percent annual coupon bond a few years ago. The bond now sells for $1,100. The bond has a call
Alliance Health Plans issued a 12 percent annual coupon bond a few years ago. The bond now sells for $1,100. The bond has a call provision that allows Alliance Health Plans to call the bond in four years at a call price of $1,060. The par value of the bond is $1,000.
- What is the bonds yield to maturity? Assume that the bond is held to maturity 10 years from now.
- What is the bonds yield to call? Yield to call refers to the return a bondholder receives if the security is held until the call date, prior to the instruments date of maturity. Assume that the bond is held to the call date 4 years from now.
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