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Masters Corp. issues two bonds with 15-year maturities.

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Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,080. The first bond is issued at a deep discount with a coupon rate of 7% and a price of $520 to yield 15.6%. The second bond is issued at par value with a coupon rate of 6.95%.;a. What is the yield to maturity of the par bond? (Round your answer to 2 decimal places.);b. If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

 

Paper#25745 | Written in 18-Jul-2015

Price : $27
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