Kaufman Enterprises has bonds outstanding with a $1,000 facevalue and

QUESTION

Kaufman Enterprises has bonds outstanding with a $1,000 facevalue and 10 years left until maturity. They have an 11percent annual coupon payment and their current price is$1,175. The bonds may be called in 5 years at 109 percent offace value (Call price = $1090)What is the yield to matur
Par Value of theBond $1,000 Number of Years toMaturity 10 years Annual Coupon Rate 11% Current Price of theBond $1,175 Call Price of the Bond $1,090 CalculatingYTM: (Using Ms-Excel “RATE”Function): Number of Periods 10 Annual Coupon Payment [$1,000 *11%] -$110 Present Value of theBond $1,175 Future Value (or) Par Value of theBond -$1,000 Rate of Return on the Bond(RATE) 8.35% Calculating YTC (Yield ToCall) (Using Ms-Excel “RATE”Function): Number of Periods 5 Annual Coupon Payment [$1,000 *11%] -$110 Present Value of theBond $1,175

ture Value (or) Par Value of theBond -$1,090 Rate of Return on the Bond(RATE) 8.13% Yield to Maturity on theBond (YTM) 8.35% Yield to Call on theBond (YTC) 8.13% if the Bond is a PremiumBond YTM > YTC if the Bond is a DiscountBond YTM < YTC Note: Here, the Bond isa Premium Bond. Thus, the Yield to Maturity (YTM) is greater thanthe Yield to Call (YTC).   ANSWER: CLICK REQUEST FOR  AN EXPERT SOLUTION