1. Why may the yield to call for a bond have more than one value?
2. A portfolio manager is considering buying two bonds. Bond A matures in four years and has a coupon rate of 6% payable semiannually. Bond B, of the same credit quality, matures in 10 years and has a coupon rate of 8% payable semiannually. Both bonds are priced at par.
a. Suppose that the portfolio manager plans to hold the bond that is purchased for four years. Which would be the preferred bond for the portfolio manager to purchase?
b. Suppose that the portfolio manager plans to hold the bond that is purchased for six years instead of four years. In this case, which would be the preferred bond for the portfolio manager to purchase?