Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the following questions.
Be sure you show your work here for the price and current yield and then answer the questions below.
XY 5.25% (interest paid annually) for 20 years
AB 14% (interest paid annually) for 20 years
A. Which bond has a current yield that exceeds the yield to maturity?
B. Which bond may you expect to be called? Why?
C. If CD, Inc., has a bond with a 5.25% coupon and a maturity of 20 years but which was lower rated, what would be its price relative to the XY, Inc., bond? Explain