Consider the case of Blanche Inc.:

Blanche Inc. 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 $1,130.35. However, Blanche Inc. 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 Blanche Inc.s bonds?

Value

YTM ___________

_(answers

9.89%

8.32%

9.59%

7.64%

YTC _____________

7.36%

8.55%

6.47%

9.89%

If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blanche Inc.s bonds?

13 years

8 years

5 years

18 years

If Blanche Inc. issued new bonds today, what coupon rate must the bonds have to be issued at par?

7.64%

6.47%

8.55%

9.89%