Question

Keenan Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond’s nominal yield to call?

6.77%
	5.09%
	4.42%
	5.54%
	5.59%

Answer 1

Answer is 5.59%

В 15 А 1 2 Maturity (years) 3 Face Value 4 Coupon Rate 5 YTM 6 Current price 7 Time to Call 8 Call Price 9 Frequency 10 11 YTC $1,000 8.25% 6.50% $1,166 6 years $1,045 2 semi-annual 5.59% 13

В 15 А 1 2 Maturity (years) 3 Face Value 4 Coupon Rate 5 YTM 6 Current price 7 Time to Call 8 Call Price 9 Frequency 10 11 YTC $1,000 8.25% 6.50% $1,166 6 years $1,045 2 semi-annual 5.59% 13

1 15 1000 2 Maturity (years) 3 Face Value 4 Coupon Rate 5 YTM 6 Current price 7 Time to Call 8 Call Price 9 Frequency 10 11 YTC 0.0825 0.065 =-PV(B5/B9,B2*B9,B4*B3/B9,B3) years 1045 semi-annual =B9*RATE(B7*B9,B4*B3/B9,-B6,B8) 12