Yield to maturity
A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 4 years at $1,044, and currently sell at a price of $1,087.24.
What is their nominal yield to maturity? Round your answer to two decimal places.
Answer: ____%
What is their nominal yield to call? Round your answer to two decimal places.
Answer: ____%
Expectations Theory
Interest rates on 4-year Treasury securities are currently 6.6%, while 6-year Treasury securities yield 7.25%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Round your answer to two decimal places.
Answer: _______%