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1) It is now January 1, 2012, and you are thinking the purchase of the outstanding bond which was issued on January 1, 2010. It has a= 7.5% annual coupon and had a= 30-year original maturity. (It matures on December 31, 2039.) There is five years of call protection (until December 31, 2014), after which time it can be called at 109-that is, at 109% of par, or $1,090. Interest rates have declined as it was issued; and it is now selling at= 119.575% of par, or $1,195.75.

a) Determine the yield to maturity?

b) Compute the yield to call?

2) Callaghan Motors' bonds have twenty four years remaining to maturity. Interest is paid annually, they have a= $1,000 par value, coupon interest rate is= 9%, and the yield to maturity is= 8%. Determine bond's present market price?

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