5pts Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon...

Question

Question

Answer 1

Answer #1

FV = 1000
Nper = 15 * 2 = 30
PMT = 1000 * 8.25% / 2 = 41.25
Rate = 7.30% / 2 = 3.65%

Bond price can be calculated by using the following excel formula:
=PV(rate,nper,pmt,fv)
=PV(3.65%,30,-41.25,-1000)
= $1,085.74

Calculation of yield to call:

Nper = 6 * 2 = 12
PMT = 41.25
PV = 1085.74
FV = 1045

Yield to call can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)*2
=RATE(12,41.25,-1085.74,1045)*2
= 7.09%

Yield to call = 7.09%

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Answer 2

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