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Suppose that a firm issues a callable 30-year,semi-annual bond with a coupon rate of 8%. The par value of the bond is $1,000. The firm
Suppose that a firm issues a callable 30-year,semi-annual bond with a coupon rate of 8%. The par value of the bond is $1,000. The firm can call the bond starting at the end of the 8thyear. If the current price of the bond is $1,045 and the call requires the firm to pay one year of additional interest at the call (two coupon payments), what is the yield to call of the bond if we assume it will be called on the first available date?
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