Cpc perpetual bond

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1. Determine the value of a $1,000 CPC perpetual bond with a 4% coupon rate when the required rate of return is 4%? What is its value if the required rate were 5%?

2. BCC issued 8 ½% bonds a few years ago, and it has 20 years remaining to maturity. Assume annual coupon payments and a par value of $1,000. If an investor pays $1,025 for the bond, what is its YTM? Why would the investor pay more than par value?

3. ABC issued 7 3/8% bonds with annual interest payments that matures in 2042, but is callable at $1,037.08 in 2017, seven years from today. What is its yield to call if an investor bought a $1,000 bond for $900? (Hint: the yield to call is computed by replacing the maturity value M by the call price and the number of years until maturity n by the number of years until the call.)

Reference no: EM131483161

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