Question

Coupoin payments are fixed, but the percentoge return thatinvestors receive varies based on market conditions. This percentsge return is referred to as the bondis yleid. Kield to maturity (YTM) ia the rote of return expected from a bond held untif its maturity date, However, the irTM equals the okpected rate of return under certain assumptions. Which of the following is one of those assiumptions? The bond win not be called. The bond hats an earty redemption feature. Considec the case of Bianche inc.t ganche the hat 9 , annuat coupon bonds that are callable and haye 18 yeara left until maturity. The bonds have-a par value of s1, ooo, and thelr current market price is $1,100,35. Howevec, Blanche inc. may call the bonds in eight years at a call price of s1, 050. Whak are the lim and the yleid to call (rTction Bionche the: o bonds? If interest, rates are axpected ro remain constant, what is the best astomate of the ramaining infe ieft for Bianche inc.s bonds? 20 years 13 vesera 15,yesis 0.yars

Answer 1

One of the assumptions for yield to maturity (YTM) is that the bond will not be called. To calculate the yield to call, you need to consider the time remaining until the call date, the call price, and the current market price of the bond. The remaining time left for Blanche Inc.'s bonds is 10 years.

Step-by-step explanation:

One of the assumptions for yield to maturity (YTM) is that the bond will not be called. A callable bond is one that can be redeemed by the issuer before its maturity date. In the case of Blanche Inc., if the bond is called in eight years, the yield to call (YTC) will be different from the yield to maturity (YTM).

To calculate the yield to call, you need to consider the time remaining until the call date, the call price, and the current market price of the bond. Based on the information provided, the time remaining until the call date is 8 years, and the call price is $1,050. The current market price is $1,100.35. Using this information, you can calculate the yield to call.

To estimate the remaining time left for Blanche Inc.'s bonds, you can subtract the call date (8 years) from the maturity date (18 years), which gives you 10 years.