Determine the minimum yield rate an investor would receive

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Reference no: EM131319914

Suppose a bond has a term of 17 years with annual coupons. The bond has a face value of 508 and a redemption value of 494. The bond may be called at any time on or after the 9th coupon payment. The price paid for the bond is 476. The minimum yield rate is denoted by i. The coupon rate is equal to 0.9*i. Determine the minimum yield rate an investor would receive. (hint: The "unknown coupon rate" was used so that the equation you get will be solvable without needing a financial calculator. Determine when the bond will be called based on the relationship between price and redemption value. Then set up an equation using one of the bond pricing formulas and that r = 0.9i so help you solve for i). Round your answer to four decimal places.

Reference no: EM131319914

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