Question
You are considering buying an IBM bond. The bond has an 8% fixed-rate semiannual coupon and $1,000 face value. The bond is scheduled to mature
You are considering buying an IBM bond. The bond has an 8% fixed-rate semiannual coupon and $1,000 face value. The bond is scheduled to mature in 9 years and has a price of $1,150. It is also callable in 5 years at a call price of $1,040. For questions 1 and 2, show your calculator keystrokes where appropriate. What is the bond's nominal yield to maturity (find the annual rate)? What is the bond's nominal yield to call (find the annual rate)? If you were to purchase the IBM bond, would you be more likely to receive the YTM or the YTC? Explain your answer. I want to check Part A the YTM=2.92, Part B= 2.63 and the last part wouldnt they want the YTC? But I need a little more information as to why.
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