Meacham Enterprises' bonds currently sell for $880 and have a par value of $1,000. They pay...
Meacham Enterprises' bonds currently sell for $880 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?
Select the correct answer.
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Homework Answers
| C | 135 | |
| n | 5 | |
| P | 1050 | |
| Bond Price | 880 | |
| Yield to call | YTC | |
| Bond price =C*[1-(1+YTC)^-n / YTC] + [P/(1+YTC)^n] | ||
| Where, | ||
| C= Coupon amount | ||
| n = Number of periods | ||
| P= Par value | ||
| $880=135 * [1 - (1 + YTC)^-5 / YTC] + [1050 / (1 + YTC) ^5] | ||
| YTC =14.04% | ||
| Correct Option: SECOND | ||
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