Question
Yield to Call and Yield to Maturity It is now January 1, 2014, and you are considering the purchase of an outstanding bond that was
Yield to Call and Yield to Maturity
It is now January 1, 2014, and you are considering the purchase of an outstanding bond that was issued on January 1, 2012. It has a 8.5% annual coupon and had a 30-year original maturity. (It matures on December 31, 2041.) There is 5 years of call protection (until December 31, 2016), after which time it can be called at 109-that is, at 109% of par, or $1,090. Interest rates have declined since it was issued; and it is now selling at 119.575% of par, or $1,195.75.
What is the yield to maturity? Round Answer to two decimal places
What is the yield to call? Round answer to two decimal places.
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