Discuss the following statement: “We don’t want individual plant managers to get involved in the firm’s tax position. So instead of telling them to take the pretax cash flows and discount rate of 10% we just tell them to take the pretax cash flows and discount at 15%. With a 35% tax rate, 15% pretax generates approximately 10% after tax.
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Ответ:
the yield to call of this bond is: 5.48%
Explanation:
Given:
Face value: $1,000 (FP)Coupon rate of 5% => Coupon payment is: 5%*1000 = $50 (C) Call price of bond $960 (CP)n = 10 yearsAs we know that, the formula to find out yield to call is:
YTC =
=
= 0.0548
= 5.48%
So the yield to call of this bond is: 5.48%