Coupon | 70 | |
Fv | 1000 | |
N | 20 | |
Years to call | 6 | |
Call price | 1025 | |
PV | 1385.02 | |
YTM | 8.27% | |
YTC | 1.62% |
a: Since YTC is lower than YTM the bonds would be called. So their remaining life=6 years
b: Option V is right
Since the bonds are selling ata premium, the coupon rate should be the market rate.This would be the YTM. The par value of bonds will be equal to its price only when the coupon rate matches the YTM. Hence other options are incorrect.
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