Question

Micron Technology's bonds currently sell for $1,280 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)? Your answer should be between 4.56 and 8.32, rounded to 2 decimal places, with no special characters, D Question 10 5 pts Eagle Industries' bonds have a 10-year maturity and a 7.60% coupon paid semiannually. They sell at their $1.000 par value, and are not callable. What is the effective annual rate (EFF%) for these bonds? Recall that EFF%= (1 + (Nominal Rate /n)] + 1 Your answer should be between 7.20 and 9.12. rounded to 2 decimal places, with no special characters.

Answer 1

Coupon rate is 7.60% payable semiannual

coupons are not callable and its selling price is equal to its bond price. It means Bonds coupon rate is equal to its market interest rate of yield to maturity.

so market interest rate (nominal rate) is 7.60%

number of compounding in year (n) =2

effective interest rate = ((1+(nominal rate/n))^n)-1

=((1+(7.6%/2))^2)-1

=0.077444 or 7.7444%

So effective interest rate is 7.7444%