Homework Answers
| Yeild to Call (YTC) = | Annual coupon Interest+(Call Price -Market Price)/Number of Years to Call | ||
| (Call Price +Market Price)/2 | |||
Assuming face value of Bond $100
Coupon Interest = Face value * 4% = 100 *4% = $4
Call Price = $105
Market Price = $97.8
No. of year to call = 5
YTC = 4 + (105-97.8)/5
(105 +97.8)/2
YTC = 4+ 1.44
101.4
YTC = 5.44/ 101.4
YTC = 0.0536 or 5.36%
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