Annual Coupon Assignment | Professional Writing
A bond’s yield to maturity (YTM) is the percentage return that it is expected to generate if the bond is assumed to be held until it matures. Calculating a bond’s YTM requires you to make several assumptions. Which of the following is one of these assumptions? The bond is callable. The probability of default is zero. Consider the following case of Blue Pencil Publishing: Blue Pencil Publishing has 9% annual coupon bonds that are callable and have 18 years left until maturity.
The bonds have a par value of $1,000, and their current market price is $1130.35. However, Blue Pencil Publishing may call the bonds in eight years at a call price of $1,060. What are the YTM and yield to call (YTC) on bonds? Blue Pencil Publishing’s bonds have a yield-to-maturity (YTM) of and a yield-to-call (YTC) of If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blue Pencil Publishing’s bonds? 18 years 5 years 8 years Chapter 6 Assignment BOND VALUE (5) 1-Year Bond 10-Year Bond 12 16 20 INTEREST RATE (%) Based on the graph, which of the following statements is true? Neither band has any interest rate nisk 16 8 12 INTEREST RATE (%) Based on the graph, which of the following statements is true? Neither bond has any interest rate risk. O The 10-year bond has more interest rate risk. The 1-year bond has more interest rate risk. Both bonds have equal interest rate risk. Which type of bonds offer a higher yield? Callable bonds Noncallable bonds Grade It Now Save & Continue
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