Problem 5-8
Yield to Maturity and Call with Semiannual Payments
Thatcher Corporation's bonds will mature in 15 years. The bonds have a face value of $1,000 and an 7.5% coupon rate, paid semiannually. The price of the bonds is $900. The bonds are callable in 5 years at a call price of $1,050. Round your answers to two decimal places.
What is their yield to maturity?
%
What is their yield to call?
%
Yield to maturity | Yield to call | |||||||
Par value of bonds | 1000 | Par value of bonds | 1000 | |||||
Issue of bonds | 900 | Issue of bonds | 900 | |||||
Semi annuall interest | 37.5 | Semi annuall interest | 37.5 | |||||
Number of period to maturity | 30 | call price | 1050 | |||||
Number of periods to call | 10 | Number of periods to call | 10 | |||||
Annuity PVF for 30 periods at 4.35% | 16.58029 | Annuity PVF for 10 periods at 5.46% | 7.5521 | |||||
PVF for 30th period at 4.35% | 0.278757 | PVF for 10th period at 5.46% | 0.587655 | |||||
Present value of interest | 621.7609 | Present value of interest | 283.2038 | |||||
Present value of maturity | 278.757 | Present value of maturity | 617.0378 | |||||
Price of bonds | 900.5179 | Price of bonds | 900.2415 | |||||
Annual Yield to maturity = 4.35*2 = 8.70% | Annual Yield to call = 5.46*2=10.92% |
Problem 5-8 Yield to Maturity and Call with Semiannual Payments Thatcher Corporation's bonds will mature in...
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