Question

Assume that an investor is looking at two​ bonds: Bond A is a10​-year,10​%​(semiannual pay) bond that...

Assume that an investor is looking at two​ bonds: Bond A is a10​-year,10​%​(semiannual pay) bond that is priced to yield12%.  Bond B is a10​-year,9​%​(annual pay) bond that is priced to yield9.5​%.Both bonds carry5​-yearcall deferments and call prices​ (in 5​ years) of ​$1,050.

a. Which bond has the higher current​ yield?

b. Which bond has the higher​ YTM?

c. Which bond has the higher​ YTC?

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Answer #1

Formula Used:-

Price of Bond A=PV(D3/2,D1*2,-D4*D2/2,-D4)
Price of Bond B=PV(D6/2,D1*2,-D4*D5/2,-D4)

YTM of A=D3
YTM of B=D6

YTC of A=RATE(5,-D4*D2/2,D8,-1050)
YTC of B=RATE(5,-D4*D5/2,D9,-1050)

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