5. Bond yields Coupon payments are fixed, but the percentage return that investors receive varies based on...

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Finance

5. Bond yields
Coupon payments are fixed, but the percentage return thatinvestors receive varies based on market conditions. Thispercentage return is referred to as the bond’s yield.
Yield to maturity (YTM) is the rate of return expected from abond held until its maturity date. However, the YTM equals theexpected rate of return under certain assumptions. Which of thefollowing is one of those assumptions?
The bond will not be called.
The bond has an early redemption feature.
Consider the case of Demed Inc.:
Demed Inc. has 9% annual coupon bonds that are callable and have18 years left until maturity. The bonds have a par value of $1,000,and their current market price is $1,040.35. However, Demed Inc.may call the bonds in eight years at a call price of $1,060. Whatare the YTM and the yield to call (YTC) on Demed Inc.’s bonds?
Value
YTM
YTC
If interest rates are expected to remain constant, what is thebest estimate of the remaining life left for Demed Inc.’sbonds?
18 years
8 years
13 years
5 years
If Demed Inc. issued new bonds today, what coupon rate must thebonds have to be issued at par?

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5. Bond yieldsCoupon payments are fixed, but the percentage return thatinvestors receive varies based on market conditions. Thispercentage return is referred to as the bond’s yield.Yield to maturity (YTM) is the rate of return expected from abond held until its maturity date. However, the YTM equals theexpected rate of return under certain assumptions. Which of thefollowing is one of those assumptions?The bond will not be called.The bond has an early redemption feature.Consider the case of Demed Inc.:Demed Inc. has 9% annual coupon bonds that are callable and have18 years left until maturity. The bonds have a par value of $1,000,and their current market price is $1,040.35. However, Demed Inc.may call the bonds in eight years at a call price of $1,060. Whatare the YTM and the yield to call (YTC) on Demed Inc.’s bonds?ValueYTM YTC If interest rates are expected to remain constant, what is thebest estimate of the remaining life left for Demed Inc.’sbonds?18 years8 years13 years5 yearsIf Demed Inc. issued new bonds today, what coupon rate must thebonds have to be issued at par?