Masters corp issues two bonds with 18-year maturities both, Ask an Expert

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Masters Corp. issues two bonds with 18-year maturities. Both bonds are callable at $1,050. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $640 to yield 8.0%. The second bond is issued at par value with a coupon rate of 9.35%.

a. What is the yield to maturity of the par bond? (Round your answer to 2 decimal places.)

Yield to maturity %

b. If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

Bond with a coupon rate 4%

Bond with a coupon rate 9.35%

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92762689

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