A 4.35 percent coupon municipal bond has 15 years left to maturity and has a pri

Question

A 4.35 percent coupon municipal bond has 15 years left to maturity and has a price quote of 107.50. 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 4.35 percent coupon municipal bond has 15 years left to maturity and has a price quote of 107.50. 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

corrent yield= 4.35/107.5= 4.047% or 4.05% YTM= 4.35PVIFA(YTM,15)+ 1000PVIF(YTM,15) YTM= 3.69%

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