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You have owned a 20 year bond for 5 years now. The bond has a 3% annual coupon of $1,000 and a current YTM of
You have owned a 20 year bond for 5 years now. The bond has a 3% annual coupon of $1,000 and a current YTM of 4.26% on the market. If the bond has a call provision that could be exercised in 4 years, at a premium of $1,100, what yield do you anticipate earning on the call? And, do you anticipate earning the YTM or the YTC return (assuming that the current YTM of 4.26% is maintained for the next 4 years?)
A. 7.07% YTC
B. 4.26% YTM
C. 9.46% YTM
D. 3.00% YTC
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