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Yield To Maturity and To Call

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Yield to maturity: A firm's bonds have a maturity of 10 years with a $1,000 face value, and a 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 Preview

The yield to maturity of a debt instrument is the rate which equalizes its purchase price (present value) with the periodic interest payments (an ...

Solution Summary

Using an Excel spreadsheet, this solution illustrates how to compute the yield to maturity and the yield to call on a callable bond.

$2.19