Yield to callIt is now January 1, 2016, and you are considering the purchase of an outstanding bond that was issued on J...
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Yield to call
It is now January 1, 2016, and you are considering the purchase of an outstanding bond that was issued on January 1, 2014. It has a 8.5% annual coupon and had a 30-year original maturity. (It matures on December 31, 2018), after which time it can be called at 109-that is, at 109% of par, or $1,090. Interest rates have declined since it was issued, and it is now selling at 119.575% of par, or $1,195.75.
a. 1. What is the yield to maturity? Round your answer to two decimal places.
2. What is the yield to call? Round your answer to two decimal places.