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Answer all questions please 1. It is now August 1, 2021, and you are considering the purchase of an outstanding bond that was issued on
Answer all questions please
1. It is now August 1, 2021, and you are considering the purchase of an outstanding bond that was issued on August 1, 2020. It has an 6% semiannual coupon and had a 20-year original maturity. (It matures on August 1, 2040) There is a 5 years of call protection (until August 1, 2025), after which time it can be called at 108-that is, at 108% of par, or $1,080. Interest rates have declined since it was issued, and it is now selling at 1.12% of par, or $1,191.20. a. What is the yield to maturity? What is the yield to call? b. If you bought this bond, which yield would you more likely to earn? Explain your reasoning. c. Calculate this bond current yield and capital gain yield Step by Step Solution
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