Question

YIELD TO MATURITY A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 6 years at $1,054, and currently sell at a price of $1,104.30. a. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. b. What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places. c. What return should investors expect to earn on these bonds? ● Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. II. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. III. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. IV. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC. V. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. -select.

Answer 1

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Home er Page Layout Formas Data Review V Add-Ins Define Name Use in Formula- ? Create from Selection Trace Precedents t Trace Dependents Remove Arrows Show Formulas Error Checking Evaluate Formula Window Calculate Now a Insert AutoSum Recently Financial Logical Tet Date &Lookup & Math More Watch CalculationCalculate Sheet Used Time. Reference ▼ & Tng▼ Functions, Manager Options Function Library Defined Names Formula Auditing Calculation HX19 HW HX HZ IB IC LIFE COUPON PAR VALUE PV PERIODS 12 8% semiannual 1000 4 1104.3 excel 3.36% semi annual 6.72% ANNUAL 6 [-RATE(HY1"HY5,-HY2"HY3/2,HY4,-HY3)] YTM 10 called in 6 1104.3 call price YTC YTC 1054 3.31% semi annual 6.61% annual 12 13 14 15 16 17 18 19 :4 | YIELD SPOT [-RATE(HY10*HYS,-HY2*HY3/2,HY11,-HY12)) would an investor be more likley to earn the YTM or the YTC INVESTORS WOULD EXPECT BOND TO BE CALLED &TO EARN YTC, BECAUSE YTC IS LESS THAN YTM Sheet2 AFN BANKING NOTE BIDDING, UNDERWRITING EUAC AW PM LIFE . LP, 1, MRP, INFLATION YIELD WARRAN Trefund bond CLEAN INVOICE PRICE 07:38