Part 1: A typical US corporate bond pays $60 a year and has a yield to maturity of 5.6%. It matures in 12 years What is this bond’s price? As you know, the Federal Reserve has been raising interest rates. This action causes bond yields to also rise. If this bond’s yield is pushed up to, say, 6.2%, what is the new price?
Part 2: Say the company issuing this bond decides to pay off the bond early. It can do that at the end of two years from now. The price it has promised to pay at that time is $1,120. If this happens, and assuming the price you calculated in the first part of this problem above, what is the yield to call?
Please explain how to solve this problem