Final Answer:
The Yield to Maturity (YTM) for the investor purchasing a 20-year 5.30% bond at par value is approximately 5.30%. This assumes the bond is held until maturity and is not called before its term.
Step-by-step explanation:
The Yield to Maturity (YTM) is the annual rate of return an investor can expect to receive if a bond is held until it matures. In this scenario, the investor purchases a 20-year bond with a coupon rate of 5.30%. Since the bond is bought at par value, which is typically $1,000, the annual interest (coupon payment) would be 5.30% of $1,000, resulting in $53.
If the bond is held until maturity, and since it was purchased at par value, the yield to maturity is the same as the coupon rate, which is 5.30%. However, if the bond is called before maturity (as mentioned in the question), the yield to call (YTC) becomes relevant. The YTC is the yield an investor can expect if the bond is called at the earliest call date. The question doesn't provide information about the call price, so it's assumed to be at par value. In this case, if the bond is called after 5 years, the YTM for the first 5 years would be the coupon rate of 5.30%, and after the call date, the yield would be 5.75% as mentioned. However, the overall YTM for the entire 20-year period is not explicitly provided.
In conclusion, if the bond is held until maturity, the YTM is 5.30%, assuming it's not called. If it is called after 5 years, the yield for the first 5 years is 5.30%, and after the call date, it's 5.75%. The overall YTM for the entire period depends on the specific terms of the bond and whether it is called or not.