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Mr alert tucker of pleasant valley ohio is an investor who

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Mr. Alert Tucker of Pleasant Valley, Ohio is an investor who is interested in allocating part of his portfolio to investment-grade corporate bonds with 15-year maturity. He recently received two proposals to choose from.

Prudential: A 7% coupon bond that sells for $1,100. Coupon payments are made semiannually.

Morgan Stanley: A 6% coupon bond that sells for $980. Coupon payments are made annually.

A-Calculate each option YTM and CY.

B-If Prudential bond can be called at the end of five years at a call value of 950, calculate YTC.

C-If Morgan Stanley bond can be called at the end of seven years at a call value of 985, calculate YTC.

Answer

Q#

Bond

N

PMT

FV

PV

I =YTM

CY

1.a

Prudential

 

 

 

 

 

 

Morgan Stanley

 

 

 

 

 

 

1.b

Bond

N

PMT

CV

PV

YTC

 

Prudential

 

 

 

 

 

 

1.c

Bond

N

PMT

CV

PV

YTC

 

Morgan Stanley

 

 

 

 

 

 

Reference no: EM13480060

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