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Callaghan Motor's Bonds: Maturity and Interest

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1. Callaghan Motor's bonds have 10 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 8 percent; and the yield to maturity is 9 percent. What is the bond's current market price?

2. A bond has a 1,000 par value, 10 years to maturity, a 7 percent annual coupon, and sells for $985.
What is its current yield? What is its yield to maturity? Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today?

3. A firm's bond's have a maturity of 10 years with a $1,000 face value, an 8 percent semiannual coupon, are callable in 5 years at $1,050, and currently sell at a price of $1,100. What are their yield to maturity and their yield to call? What return should investors expect to earn on this bond?

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Solution Summary

This is response finding yields to maturity, current yields, and investors' return.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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