Question

Masters corp. issues two bonds with 20-year maturities. both bonds are callable at $1,050. the first bond is issued at a deep discount with a coupon rate of 4% and a price of $580 to yield 8.4%. the second bond is issued at par value with a coupon rate of 8.75%.


a. what is the yield to maturity of the par bond? (round your answer to 2 decimal places.) yield to maturity %


b. if you expect rates to fall substantially in the next two years, which bond would you prefer to hold? bond with a coupon rate 4% bond with a coupon rate 8.75%

Answer 1

a. what is the yield to maturity of the par bond? (round your answer to 2 decimal places.) yield to maturity % 10%

b. if you expect rates to fall substantially in the next two years, which bond would you prefer to hold? bond with a coupon rate 4% bond with a coupon rate 8.75% Unsolvable