Jerome Corp. bonds have 15 years to maturity an 8.75% coupon paid semi-annually and a $1,000 par value. The...

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Finance

Jerome Corp. bonds have
15 years to maturity
an 8.75% coupon paid semi-annually
and a $1,000 par value.
The bond has a 6.50% yield to maturity, but it can be called in6 years at a price of $1,050.
What is the bond's market price?
What is the bond's yield to call?

Answer & Explanation Solved by verified expert

3.7 Ratings (422 Votes)

K = Nx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =15x2

Bond Price =? [(8.75*1000/200)/(1 + 6.5/200)^k] + 1000/(1 + 6.5/200)^15x2

k=1

Bond Price = 1213.55

K = Time to callx2

Bond Price =? [(Semi Annual Coupon)/(1 + YTC/2)^k] + Call Price/(1 + YTC/2)^Time to callx2

k=1

K =6x2

1213.55 =? [(8.75*1000/200)/(1 + YTC/200)^k] + 1050/(1 + YTC/200)^6x2

k=1

YTC% = 5.27

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Jerome Corp. bonds have 15 years to maturity an 8.75% coupon paid semi-annually and a $1,000 par value. The...

Free

90.2K

Verified Solution

Question

Finance

Jerome Corp. bonds have
15 years to maturity
an 8.75% coupon paid semi-annually
and a $1,000 par value.
The bond has a 6.50% yield to maturity, but it can be called in6 years at a price of $1,050.
What is the bond's market price?
What is the bond's yield to call?

Answer & Explanation Solved by verified expert

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Jerome Corp. bonds have 15 years to maturity an 8.75% coupon paid semi-annually and a $1,000 par value. The...

Free

90.2K

Verified Solution

Question

Finance

Jerome Corp. bonds have15 years to maturityan 8.75% coupon paid semi-annuallyand a $1,000 par value.The bond has a 6.50% yield to maturity, but it can be called in6 years at a price of $1,050.What is the bond's market price?What is the bond's yield to call?

Answer & Explanation Solved by verified expert

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Membership Benefits:

Transcribed Image Text

Other questions asked by students

Jerome Corp. bonds have
15 years to maturity
an 8.75% coupon paid semi-annually
and a $1,000 par value.
The bond has a 6.50% yield to maturity, but it can be called in6 years at a price of $1,050.
What is the bond's market price?
What is the bond's yield to call?