A 10-year, 8% coupon bond is currently trading at 98.5 of par ...

By Investopedia Staff AAA
Q:
A 10-year, 8% coupon bond is currently trading at 98.5 of par. This bond is callable in 5-years at a price of 101.5. However, it also has a putable feature which comes into effect in 4 years at a strike price of 97.5. What is this bond's current yield to put measure?
a) 7.90%
b) 8.22%
c) 8.62%
d) 8.11%
A:

The correct answer is: a)
In your approved calculator, key the following amounts and solve for i:
FV = 97.5
PMT = 4
n = 8
PV = 98.5
i = ? = 3.95
Therefore, Yield-to-Put = 3.95 x 2 = 7.90%


RELATED FAQS

  1. The Shur-Gro variable annuity uses an AIR of 3% for those contract holders who are ...

    The correct answer is b. Any time the actual growth rate of the separate account exceeds the account’s AIR, the payment will ...
  2. Sometimes investment banking firms allocate shares of hot issues to the personal ...

    The correct answer is a) Spinning is the act of selling hot issues to the personal accounts of corporate officers which in ...
  3. Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although ...

    The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
  4. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center