Blue Moose Home Builder’s Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,130.35. However, Blue Moose Home Builders Inc. may call the bonds in eight years at a call price of $1,060.
What is the yield to maturity rate? What is the yield to call rate?
If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Blue Moose Home Builder’s Inc.’s bonds?
If they issued new bonds today, what coupon rate must the bonds have to be issued at par?
