Eagle Enterprises has outstanding bonds which mature on August 6, 2038 years. These bonds have a coupon rate of 8%, with coupons paid semi-annually. Use the NBBH yield as its YTM (use the link below). Assume the bond is callable beginning 10 years prior to maturity at 102.50% of par value. Safari Outfitters Ltd. has outstanding bonds which mature on August 6, 2048 years. These bonds have a 4.20% coupon rate, with coupons paid semi-annually. Use the NBBI yield as its YTM (use the link below). Assume the bond is callable beginning 10 years prior to maturity at 103% of par.

1. Use the appropriate Excel bond functions to calculate: a. the price of each bond (convert the resulting price into $1,000 par value form), b. the duration of each bond, and c. the modified duration of each bond. 2. If expected inflation is predicted to increase the bonds YTM 0.02%, what is the expected percentage change in each bonds price? 3. If the YTM was expected to fall by .5% instead, what is the expected percentage change in each bonds price? 4. Calculate the call premium (in dollars) for each bond (based on $1,000 par value). 5. Calculate the YTM and the YTC for each bond. The Eagles Enterprises bonds are currently valued in the market at 125% of par value and the Safari Outfitters Ltd bonds are currently valued in the market at 98.78% of par value. 6. What is the relevant yield for an investor for each bond YTM or YTC? 7. Question: Why would a firm (issuer) choose to call outstanding bonds? Be sure to reference specific changes in market conditions and/or firm condition which my prompt such action.

YTM is 6.06 and then 4.31