Ask Question
12 November, 09:55

Blanche 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, Blanche Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Blanche Inc.'s bonds?

+1
Answers (1)
  1. 12 November, 12:19
    0
    Answer:YTM = [Interest + (face value - price) / years to maturity ] / [ (face value + price) / 2] = [90 + (1000 - 1130.35) / 18 ] / [ (1000 + 1130.35) / 2] = [90 + (-130.35 / 18) ] / [2130.35/2] = [90 - 7.242 ] / 1065.175 = 82.758 / 1065.175 =.0777 or 7.77% YTC = [90 + (1060 - 1130.35) / 8] / [ (1060+1130.35) / 2] = [90 + ...

    Explanation:The best estimate for the remaining term is 18 years (because the company would not call the bonds).

    The coupon rate to issue a bond at par is 8.88% (the current yield to maturity).
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Blanche 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 ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers