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Embedded Options in Bonds: Callable bond Amos Inc. has just issued a $100 face value, callable, three-year, 5% coupon bond with semiannual coupon payments. The

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Embedded Options in Bonds: Callable bond Amos Inc. has just issued a $100 face value, callable, three-year, 5% coupon bond with semiannual coupon payments. The bond can be called at par ($100) in two years or anytime thereafter on a coupon payment date. The current (t=0) bond price is $99. a. Find the bond's YTM. b. Assume the prevailing yield of 4% at the end of two years. Should Amos call the bond? Briefly explain. c. Find the bond's YTC (assume the bond is called at the earlies possible date)

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