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Question 3 I. Use Financial Calculator: An analyst is evaluating two bonds, Bond A and Bond B. The effective maturity of both bonds is 5
Question 3 I. Use Financial Calculator: An analyst is evaluating two bonds, Bond A and Bond B. The effective maturity of both bonds is 5 years. The face value of both bonds is $1000 and the yield to maturity for the bonds is 9.5%. Bond B is a zero coupon bond whereas Bond A pays a 10% semiannual coupon. Assume that the yield to maturity of each bond remains at 9.5% over the next 5 years, calculate the price of bond A for every year (i.e. at 5, 4, 3, 2, 1, and 0 years to maturity). (6 marks) II. Use Financial Calculator: The $1,000 face value Orient bond has a coupon rate of 7%, with interest paid annually, and matures in 9 years. The bond current price is $950. The bond can be called in 4 years. The call premium on the bond is 9% of par. (6 marks) a) What is the bond's yield to maturity (YTM)? b) What is the bond's yield to call (YTC)
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