Problem:
A 4.05 percent coupon municipal bond has 14 years left to maturity and has a price quote of 108.00. The bond can be called in eight years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.)
Required:
Question 1: Compute the bond's current yield.
Question 2: Compute the yield to maturity.
Question 3: Compute the taxable equivalent yield (for an investor in the 35 percent marginal tax bracket).
Question 4: Compute the yield to call.
Note: Show supporting computations in good form.