Four years ago, your firm issued $1,000 par, 25-year bonds, with a 7 percent annualcoupon rate

Four years ago, your firm issued $1,000 par, 25-year bonds, with a 7 percent annualcoupon rate and a 10 percent call premium.a. If these bonds are now called, what is the approximate yield to call (YTC) for theinvestor who originally purchased them when they were issued?b. If these bonds are now called, what is the actual yield to call (YTC) for theinvestor who originally purchased them when they were issued? (Use thepresent value method for calculation.)c. If the current interest rate (yield-to-maturity) is 5 percent, what would anequivalent non-callable bond be selling for?

 

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