Please show work, 1,2,3,3a,3b,3c.
1. Yield to Call — Five years ago, Wyatt Corporation sold a 25-year bond issue with a 12% annual coupon rate and an 6% call premium. TODAY, they called the bonds. The bonds were originally sold at their face or par value of $1,000. Compute the realized rate of return, I/Y, for an investor who purchased the bond WHEN it was issued and who surrenders it today at the CALL price.
2. Yield to Maturity — you just purchased a bond which matures in eight years. The bond has a face value of $1,000 and a 6.25% annual coupon rate. The bond has a Current Yield of 7.29%. What is the YTM?
3. On April 1, 2017, you will consider the purchase of an outstanding bond that was issued on April 1, 2015. It has a 9.5% annual coupon, paid semiannually, and has a 30 year original maturity, that is, matures March 31, 2045. There are five years of call protection, through March 31, 2020, at which time it can be called in at 110%. Interest rates have declined since it was issued, and it is now selling for 115.875% of its par value of $1,000.
3a. What is the nominal YTM on this semiannual, 9.5% coupon bond?
3b. What is the nominal YTC on this semiannual, 9.5% coupon bond?
3c.If you decide to purchase the bond April 1, 2017, which return would you expect to earn, the YTM or YTC? Why?? hat is the current yield, _________%, and is it a capital gain or capital loss. Circle gain or loss.
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