Q9: In 2006, BCC issued 858 percent debentures that will mature on December 1, 2046.

a. If an investor purchased one of these bonds ($1,000 denomination) on December 1, 2016, for $1,050, determine the yield-to-maturity. Explain why investors would be willing to pay $1,050 on December 1, 2016, for one of these bonds when they are going to receive only $1,000 when the bond matures in 2046.

b. The BCC 858 percent debentures are callable by the company on December 1, 2021, at $1,044.50. Determine the yield to call as of December 1, 2016, assuming that BCC calls the bonds on that date.

Q15: Dooley, Inc., has outstanding $100 million (par value) bonds that pay an annual coupon rate of interest of 10.5 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 20 years. Because of Dooleys increased risk, investors now require a 14 percent rate of return on bonds of similar quality with 20 years remaining until maturity. The bonds are callable at 110 percent of par at the end of 10 years.

a. What price would the bonds sell for assuming investors do not expect them to be called?

b. What price would the bonds sell for assuming investors expect them to be called at the end of 10 years?