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and this one??? i dont understand 2. Bond Yields: YTM vs. YTC At the beginning of 2018, ABC Corp. issued (sold) $20 million in 10-year
and this one???
2. Bond Yields: YTM vs. YTC At the beginning of 2018, ABC Corp. issued (sold) $20 million in 10-year callable bonds at a par value of $1,000 that pay a 7.0% annual coupon rate that is paid semiannually. The bonds are callable after 5 years for a call premium equal to one annual coupon payment. During 2018, interest rates increased and ABC's bonds are now trading for $975.00 at the beginning of 2019. a. What is the amount of the semiannual interest payment you can expect to receive from investing in this bond? (1000 x 7% +2=35 b. What is the new yield to maturity (YTM) of the bonds at the beginning of 2019? N-9x218 404000 3.69 x 2 7.52%.? I 2 PV = 975 DMT - 35 c. What is the new yield to call (YTC) at the beginning of 2019? N=4X2=8 lv- 1070 I ? 4.62 x 2 =-9.24% PMT: 35 Pv=975 d. Should investors expect to receive YTC or YTM? Why? v 7.5.1779.24% So they expect no YTM. e. How much will the firm save or lose each year in interest if the existing bonds are called and reissued? You may ignore any costs involved in calling/re-issuing the bonds. (7% - 7.52% ) X 20,000 000 0.52 X 20,000000 104,660 (loss) i dont understand
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