Three years ago, Stryker Corp.'s 10 per cent coupon, 20-year bond (par value = $1000) was selling at par. The bond had an 8 per cent call premium and a deferred call period of 5 years.
(a) Currently, investors are demanding a return of 8 per cent on this bond. Calculate its current price using both annual and semi-annual compounding.
(b) What is the approximate yield to call that an investor would earn if the bond is called back at this time? (Use annual compounding only.)

Question

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The Answer of Three years ago, Stryker Corp.'s 10 per cent coupon, 20-year bond (par value = $1000) was selling at par. The bond had an 8 per cent call premium and a deferred call period of 5 years.
(a) Currently, investors are demanding a return of 8 per cent on this bond. Calculate its current price using both annual and semi-annual compounding.
(b) What is the approximate yield to call that an investor would earn if the bond is called back at this time? (Use annual compounding only.)

Three Years Ago, Stryker Corp