Question

Example: Suppose the 8% coupon (semiannual), 30-year maturity bond sells for $1 ,150 and is callable in 10 years at a call price of $1,100. What is its yield to maturit y and yield to call? • Yield to maturity? • Yield to call?

Answer 1

Calculating yield to maturity,

Using TVM Calculation,

I = [ PV = -1,150 , FV= 1,000, PMT = 40, N = 60]

I = 6.82%

Calculating yield to call,

Using TVM Calculation,

I = [PV = -1,150, PMT = 40, N = 20, FV = 1,100]

I = 6.64%