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Lucas thinks that he has found an interesting bond investment for his client's portfolio. Lucas, when searching for investment ideas, focused on his client's coal
Lucas thinks that he has found an interesting bond investment for his client's portfolio. Lucas, when searching for investment ideas, focused on his client's coal of return meximization. The bond has a face value of $ with a meturity date in seven years. The bond's coupon rate is percent compounded annually. Tocky, the bond sells for
$ The indenture agreement states that the bond can be called for $ after five years. Which of the following statements is true?
a The current yield is greater than both the yield to maturity and yield to call.
b Given the client's investment objective, this bond should do particularly well if interest rates start to increase.
c Lucas can lock in a yield to maturity that is higher than the current yield by purchasing the bond today.
d The value of the bond today, in comparison to the spread in the yield to maturity and the current yield, indicates that this bond will not be called early.
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