Homework Answers
A: YTM of par bond= 16.5%
(YTM of the par bond is the same as it’s coupon rate)
B:Bond with a coupon rate of 6%
(Lower the coupon rate, higher is the sensitivity to price in response to changes in interest rates. Hence the bond with 6% coupon will give greater capital gains due to reduction in interest rates)
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Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,080. The first...
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