A firm’s outstanding bonds have a $1,000 par value, are investment grade and mature in 6...

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Finance

A firm’s outstanding bonds have a $1,000 par value, areinvestment grade and mature in 6 years. These bonds pay interestsemiannually with a coupon of 8.0%. Assume that bond sells for$955.00.
(a) What is the Yield-to-Maturity (YTM) bond?
(b) What is the bond’s Current Yield?
(c) What is the bond’s Capital Gains Yield?
(d) Now, suppose the bond is trading at $1,150 and that the bondis callable in 2 years from now, at a call premium of 4% ($40.00).What is the Yield-to-Call (YTC)? Would you expect your return to bethe yield-to-call or yield-to-maturity, assuming you intend to holdthe bond as long as possible?

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A firm’s outstanding bonds have a $1,000 par value, areinvestment grade and mature in 6 years. These bonds pay interestsemiannually with a coupon of 8.0%. Assume that bond sells for$955.00.(a) What is the Yield-to-Maturity (YTM) bond?(b) What is the bond’s Current Yield?(c) What is the bond’s Capital Gains Yield?(d) Now, suppose the bond is trading at $1,150 and that the bondis callable in 2 years from now, at a call premium of 4% ($40.00).What is the Yield-to-Call (YTC)? Would you expect your return to bethe yield-to-call or yield-to-maturity, assuming you intend to holdthe bond as long as possible?