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    Bond Price and Yield to Call of Bonds

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    1) Consider a bond with a par value of $1,000. The coupon is paid semi-annually and the market interest rate (effective interest rate) is 10 percent. How much would you pay for the bond if:
    a) The coupon rate is 8% and the remaining time to maturity is 20 years?
    b) The coupon rate is 12% and the remaining time to maturity is 15 years?

    2) A 20-year maturity 9% coupon bond paying coupons semiannually is callable in 5 years at a call price of $1,060. The bond currently sells at a yield to maturity of 7%. What is the yield to call?

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    1) Consider a bond with a par value of $1,000. The coupon is paid semi-annually and the market interest rate (effective interest rate) is 10 percent. How much would you pay for the bond if:
    a) The coupon rate is 8% and the remaining time to maturity is 20 years?
    b) The coupon rate is 12% and the remaining time to maturity is 15 years?

    a) We need to calculate how much the bonds have been issued by using the formula as follows: -

    where B is the bond price
    C is the coupon payment
    r is the market interest rate
    n is the period
    ...

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