1. Bond valuation
a. Nesmith Corporation's outstanding bonds have a $1,000 par value, a 6% semiannual coupon, 18 years to maturity, and an 8.5% YTM. What is the bond's price? Round your answer to the nearest cent.
2. Yield to maturity
a. A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,148, and currently sell at a price of $1,270.11.
What is their nominal yield to maturity? Round your answer to two decimal places.
%
b. What is their nominal yield to call? Round your answer to two decimal places.
%
c. What return should investors expect to earn on these bonds?
-Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC.
-Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
-Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
-Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
-Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.