Sinking Fund

Please help. I can’t figure out this anwser. It is in Book 5 of the Schweser: The 10.80% bond of PPL Corp mature on Jan 15, 2019 and currently at 104. It is semi-annual and has a Jan. 25 coupon date. If today is Jan 15 it has a maturity date of 11 years. The bond has a Sinking Fund requirment drawn randomly accordingliny: Years 1-6 (no requirment) year 7 (20%) year 8 (20%) year 9 (20%) year 10 (20%) year 11 (20%). A. - What is the expected yeild to maturity B. - What is the duration and convexity.

Hello, Which reading this is pertaining to ? -Thanks,

Hmm… Is there an easier way of doing this than work out the ytm/duration/convexity for each redemption date and then take the expectation? If so, I can’t think of it and that’s a lot of calculation. Could it be that the choices are so different that you don’t have to do that calculation?

Its page 84, book 5, 2005 books. The choices are similar, I just don’t see the math behind it and find it fairly difficult.

This problem is way to time-consuming for the CFA exam. To do this problem I would a) Calculate the ytm of the bond assuming it is redeemed (at par presumably) in each of the years in which the bond can be redeemed. b) Average them up because 20% is redeemed each year. You could get close by just doing 7 and 11 and averaging the results. Repeat for duration and convexity.