Question

An investor buys a $100,000, 10% corporate bond maturing in 2032 for $125,000. The bond is callable starting in the year 2022. What is the most appropriate measure for calculating yield

Answer 1

The best measure for calculating yield that the investor can use for the bond is C. Yield to Call.

What is Yield to Call?

The bond is a callable bond which means that there is a chance the issuer will call it if interest rates drop too low.

The fact that the bond was purchased at the premium (price higher than par) means that interest rates are low so there is a good chance of the bond being called.

The investor should therefore use the yield to call which would take into account the possibility of the bond being called.

Options for this question include:

A. Total Return

B. Current Yield

C. Yield to Call

D. Yield to Maturity

Find out more on callable bonds at brainly.com/question/24129882.

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