Homework Answers
Data for the A bond:
Lets assume that the book value of the bond: $1000.
Current market price of the bond: 1170
Price at the time of executing the call: $1100 (including the premium of $100)
Years to call: 5 years
Coupon rate: 9%
it is assumed that coupon payment frequency is annual.
Using the financial calculator,
Yield to call is 6.645%. (Answer)
Market/ Current yield is 7.692% (Answer)
Data of the B bond:
Lets assume that the book value of the bond: $1000.
Current market price of the bond: 740.60
Price at the time of executing the call: $1100 (including the premium of $100)
Years to call: 5 years
Coupon rate: 5%
it is assumed that coupon payment frequency is annual.
Using the financial calculator,
Yield to call is 14.081% (Answer)
market yield/ Current yield is 6.751% (Answer)
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