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Date Posted: 19:42:24 05/02/00 Tue
Author: Charles Hodges
Subject: Re: Summer 1997 (Exam 2) #9
In reply to: Chris Evans 's message, "Summer 1997 (Exam 2) #9" on 10:43:46 05/02/00 Tue

The yield to call is only relevant if the bond is likely to be called. In this cash, the bond being called at a premium is unlikely, since the bond is currently selling at a discount.

> Question 9 asks for the most likely EAR on the higher
> yielding security. The answer (c) is the EAR for the
> YTM on the bond. I calculated a higher EAR with the
> YTC on the bond (12.89%), but it was not one of the
> choices. Did I do the calculation wrong, or is the
> YTM considered, for the investor, "the most likely
> rate of return?"

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