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please solve will rate!! It is now January 1, 2019, and vou are considering the purchase of an outstanding bond that was issued on lanuary
please solve will rate!!
It is now January 1, 2019, and vou are considering the purchase of an outstanding bond that was issued on lanuary 1, 2017. It has a 9.5\% annual coupan and had a 20-year:originat maturity. (It matures on December 31, 2036.) There is 5 years of call protection (until December 31, 2021), after which time if can be called at 108 that is, at 1089 s of par, or $1,080, thterest rates have declined since it was issued, and it is now seling at 120,08% of por, or $1,200.80. a. What is the yeld 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 earn? 1. Investors would expect the bonds to be calied and to earn the rTC because the ric is less than the rTM. It. Investors would expect the bonds to be called asd to earn the YTC becaste the YrC is greater than the YTM. 111. Investors would not expect the bonds to be called and to eam the VTM becavse the VTM is greater than the VFC. IV. Investors would not expect the bonds to be called and to eam the YTM because the VTM is iess than the VTC. c. Suppose the bond had been selling at a discount rather than a premium. Would the veld to maturity have been the most likely return, or would the yield to call have been most likely? 1. Investors would not expect the bonds to bo catted and to earn the rTM because the VTM is greater than the VTC: I1. Investors would not expect the bonds to be called and to earn the VTM because the VTM is less than the rTC. III. Investors would expect the bonds to be called and to earn the VIC because the VTC is greater than the VTM. N. Investors would expect the bonds to be called and to earn the ric because the YTC is less than the YTM Step by Step Solution
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