1. GAMA Corporation's 5-year bonds yield 6.20% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for GAMA's bonds is DRP = 1.30% versus zero for T-bonds, and the T-bonds and corporate bonds have the same maturity risk premium. What is the liquidity premium on GAMA's bonds?
0.50%
1.55%
0.41%
0.30%
0.36%
2. Neptune Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon rate, semiannual payments, and a $1,000 par value. The bond is currently selling for $1,166.09, but it can be called in 6 years at a price of $1,120. What is the bond's nominal yield to call?
(Hint: When you solve for YTC, the FV is the call price)
7.20%
6.95%
6.53%
5.20%
7.55%