A 4.40 percent coupon municipal bond has 16 years left to maturity and has a pri

Question

A 4.40 percent coupon municipal bond has 16 years left to maturity and has a price quote of 105.50. The bond can be called in eight years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.)

A 4.40 percent coupon municipal bond has 16 years left to maturity and has a price quote of 105.50. The bond can be called in eight years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.)

Explanation / Answer

Current yeild is 4.17%

Yield to Maturity is 3.94%

Equivalent taxable yield is 6.06%

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