e. Mr. Clark is considering another bond, Bond D. It has a 7% semiannual coupon and a $1,000 face value (i.e., it pays a $35 coupon every 6 months). Bond D is scheduled to mature in 9 years and has a price of $1,140. It is also callable in 7 years at a call price of $1,020. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. % 3. If Mr. Clark were to purchase this bond, would he be more likely to receive the yield to maturity or yield to call? Explain your answer. Because the YTM is the YTC, Mr. Clark expect the bond to be called. Consequently, he would earn f. Explain briefly the difference between price risk and reinvestment risk. This risk of a decline in bond values due to an increase in interest rates is called . The risk of an income decline due to a drop in interest rates is called Which of the following bonds has the most price risk? Which has the most reinvestment risk? - A 1-year bond with a 10% annual coupon - A 5-year bond with a 10% annual coupon - A 5-year bond with a zero coupon - A 10-year bond with a 10% annual coupon - A 10-year bond with a zero coupon A Jhas the most price risk. A has the most reinvestment risk. g. Calculate the price of each bond (A,B, and C) at the end of each year until maturity, assuming interest rates remain constant. Round your answers to the nearest cent. e. Mr. Clark is considering another bond, Bond D. It has a 7% semiannual coupon and a $1,000 face value (i.e., it pays a $35 coupon every 6 months). Bond D is scheduled to mature in 9 years and has a price of $1,140. It is also callable in 7 years at a call price of $1,020. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. % 3. If Mr. Clark were to purchase this bond, would he be more likely to receive the yield to maturity or yield to call? Explain your answer. Because the YTM is the YTC, Mr. Clark expect the bond to be called. Consequently, he would earn f. Explain briefly the difference between price risk and reinvestment risk. This risk of a decline in bond values due to an increase in interest rates is called . The risk of an income decline due to a drop in interest rates is called Which of the following bonds has the most price risk? Which has the most reinvestment risk? - A 1-year bond with a 10% annual coupon - A 5-year bond with a 10% annual coupon - A 5-year bond with a zero coupon - A 10-year bond with a 10% annual coupon - A 10-year bond with a zero coupon A Jhas the most price risk. A has the most reinvestment risk. g. Calculate the price of each bond (A,B, and C) at the end of each year until maturity, assuming interest rates remain constant. Round your answers to the nearest cent
