eBook It is now January 1, 2019, and you are considering the purchase of an outstanding bond that was issued on January 1, 2017. It has a 9.5% annual coupon and had a 20-year origin which time it can be called at 108-that is, at 108% of par, or $1,050. Interest rates have declined since it was issued, and it is now selling at 116.5446 of par or $1.165.40. a. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. What is the yield to call? Do not round Intermediate calculations, Round your answer to two decimal places. 96 b. If you bought this bond, which return would you actually earn? 1. Investors would expect the bonds to be called and to earn the Vic because the VTC is less than the YTM. II. Investors would expect the bonds to be called and to earn the YTC because the YT is greater than the YTM. TIE. Investors would not expect the bonds to be called and to cam the YTM because the YTM is greater than the YTO IV. Investors would not expect the bonds to be called and to earn the YTM because the VTM is less than the YTC. C. Suppose the bond had been selling at a discount rather than a premium. Would the Vield to maturity have been the most likely return or would the vield to call have been 1. Investors would not expect the bonds to be called and to earn the YTH because the YTM is greater than the IC IT Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC III. Investors would expect the bonds to be called and to earn the YTC because the YT is greater than the YTM IV. Investors would expect the bonds to be called and to earn the Yr because the YT is less than the YTM Sectv coupon and had a 20-year original maturity. (It matures on December 31, 2036.) There is 5 years of call protection (until December 31, 2021), after -4% of par, or $1,165.40. 3. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the yield to call? Do not round intermediate calculations. Round your answer to two decimal places b. If you bought this bond, which return would you actually carn? 1. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. II. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM III. Tevestors would not expect the bonds to be called and to ear the YTM because the YTM is greater than the YTC. IV. Investors would not expect the bonds to be called and to earn the YTM because the VTM is less than the VTC c. Suppose the bond had been selling at a discount rather than a premium. Would the viold to maturity have been the most likely retum, or would the yield to call have been most likely 1. Investors would not expect the bonds to be called and to earn the VTM because the VTM is greater than the YTC. 11. Investors would not expect the bonds to be called and to earn the YTM Because the YTM is less than the YTC. III. Investors would expect the bonds to be called and to earn the YTC because the YT is greater than the YTM 11. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM Grade it Now Save & Continue Continue without saving
