This bond is a 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,100. (Assume that the bond has been issued.) Please complete the partial model. You need the following to be answered.
D) What is the bond's yield to call? Explain in words how you solved for Peridodic YTC and Annualized Nominal YTC ?
E)How would the price of the bond be affected by a change in the going market interest rate? (Hit: Conduct a sensitivity analysis of price to changes in the going market rate for the bond. Assume the bond will be called if and only if the going rate of interest falls below the coupon rate. This is an oversimplification, but assume it for the purpose of this problem.) Explain in words the Value of a bond if it's not called and the Value of a bond if it's called.