Question
Consider the case of Badger Corp.: Badger Corp. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds
Consider the case of Badger Corp.:
Badger Corp. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, Badger Corp. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Badger Corp.s bonds?
Value | |
---|---|
YTM | 6.47% |
YTC | 6.47% |
If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Badger Corp.s bonds?
10 years
18 years
8 years
5 years
If Badger Corp. issued new bonds today, what coupon rate must the bonds have to be issued at par?
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