Finance homework help

Posted on 2014-03-18 09:49:00 in Finance by SARA D

A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT



1. The bond’s coupon rate exceeds its current yield.

2. The bond’s current yield exceeds its yield to maturity.

3. If the yield to maturity stays constant until the bond matures, the bond’s price will remain at $850.

4. The bond’s current yield is equal to its coupon rate.

5. The bond’s yield to maturity is greater than its coupon rate.





McCue Inc.'s bonds currently sell for $1,100. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.)



1. 0.66%

2. 0.60%

3. 0.65%

4. 0.64%

5. 0.73%







having a hard time working these two out on my own!

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