Final answer:
The question from the student requires calculation of different yields associated with bond investments, including yield to maturity, effective annual yield, realized yield upon call, and the expected yield on the investment. These concepts are essential to understand the total return an investor might obtain from investing in a bond.
Step-by-step explanation:
The question touches upon several important concepts related to bond investment, specifically yield to maturity (YTM), effective annual yield (EAY), realized yield if the bond is called, and expected yield on the investment. Yield to maturity is a critical financial concept used to determine the annual return an investor would receive if they held a bond until its maturity date. It encapsulates both the coupon interest payments and any gains or losses realized by the bondholder upon maturity. Effective annual yield is a measure of the actual annual return on an investment, taking into account the effect of compounding interest more than once per year. Realized yield, if the bonds are called, refers to the return the investor would make if the bond issuer decides to exercise their option to repurchase the bond before it matures at a predetermined call price. Lastly, expected yield would be an investor's estimated return based on current market conditions, the bond's coupon payments, and potential for being called.