Question

Bourffs bonds currently sell for $1,300 and have a par value of $1,000. They pay a S105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their vield to call (YTC)? a. 6.00% b. 4.94% C. 4.30% d. 5.31% e. 5.10%

Answer 1

years to maturity coupon rate price Face value Future value $ $ $ 10.5% 105/1000*100 1,300.00 1,000.00 1,100.00 Annually: COUPON RATE 10.50% NPER = YEARS TO CALL PMT = $ 105.00 FACE VALUE $ 1,000.00 PRICE = PV = $ 1,300.00 FUTURE VALUE=FV $ 1,100.00 5.31% YIELD to CALL= RATE= OPTION D IS CORRECT RATE(NPER,PMT-PV,FV)