# Yield to maturity and yield to call

YIELD TO MATURITY AND YIELD TO CALL Kaufman Enterprises has bonds outstanding with a \$1,000 face value and 10 years left until maturity. They have an 11% annual coupon payment, and their current price is \$1,175. The bonds may be called in 5 years at 109% of face value (Call price = \$1,090).

a. What is the yield to maturity?

b. What is the yield to call if they are called in 5 years?

c. The bonds indenture indicates that the call provision gives the firm the right to call the bonds at the end of each year beginning in Year 5. In Year 5, the bonds may be called at 109% of face value; but in each of the next 4 years, the call percentage will decline by 1%. Thus, in Year 6, they may be called at 108% of face value; in Year 7, they may be called at 107% of face value; and so forth. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?

Prepare a spreadsheet using Excel or a similar program in which you compute the items listed in parts a, b, and d.

Be sure to compute the Yield-to-Maturity (YTM) and Yield-to-Call (YTC) for each of years 5, 6, 7, 8, and 9.

Utilizing Word, prepare a written report to your finance director:Include a detailed explanation of the conclusion you reached concerning whether or not to call the bond before maturity.

If your recommendation is to call the bond early, explain when to call the bond and your rationale.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.