Question

keenan industries has a bond outstanding with 15 years to maturity, an 8% coupon paid semiannually, and a $1,000 par value. The bond has a 6% nominal annual yield to maturity, but it can be called in 5 years at a price of $1,080. What is the bond's nominal yield to call?

Answer 1

Function Arguments х PV Rate 1 1 = 0.06 = 15 Nper = 80 1000 1 1 - = 1000 0 Type o = -1194.24498 Returns the present value of an investment: the total amount that a series of future payments is worth now. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = $1,194.24 Help on this function OK Cancel

So, Bond price is $1,194.24

Function Arguments ? x RATE Nper 5 1 1 Pmt 80 = 5 = 80 = -1194.24 = 1080 Pv -1194.24 1080 o 1 Type = 0.049664713 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = 4.97% Help on this function D OK Cancel Cancel

Hence, Yield to call is 4.97%

*Please rate thumbs up