Purchase Solution

# Luther Industries

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1. Luther Industries has just issued a callable (at 102) ten-year, 8% coupon bond with semi-annual coupon payments. The bond can be called at 102 in three years or anytime thereafter on a coupon payment date. It has a current price of 99.

a. What is the Yield to Maturity (YTM) on this bond?
b. What is the Yield to Call (YTC) on this bond?

##### Solution Summary

This solution is comprised of a detailed explanation of how to determine the Yield to Maturity (YTM) and a Yield to Call (YTC) of a given bond.

##### Solution Preview

1. Luther Industries has just issued a callable (at 102) ten-year, 8% coupon bond with semi-annual coupon payments. The bond can be called at 102 in three years or anytime thereafter on a coupon payment date. It has a current price of 99.

a. What is the Yield to Maturity (YTM) on this bond?

where B is the issued price/current price
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