Homework Answers
Answer A) Maturity years = 8 years
Face Value = $1000
Annual Coupon rate = 6% = 1000*6% = $ 60
Price = $ 1050
YTM ( Yield to maturity ) = 60+(1000-1050)/8/(1000+1050)/2
=(60-6.25)/1025
=2.2439%
b) Coupon payment for annual fixed payment= 60
Call price = 1025
Number of years to call = 4 years
Face vlue of bond = 1000
Yield to call (YTC) = 60+(1000-1025)/4/(1000+1025)/2
= (60-6.25)/1012.5
= 5.3086%
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