Question

A company issues a 25-year $7000 bond, redeemable at 100 with bond interest at j₁₂ = 8%. The bond is callable at the end of 15 years for $5735, at the end of 20 years for $7285 or at the end of 10 years for $8370. Determine the price to guarantee the investor a yield of j₁₂ = 11%. Do not round intermediate answers.

Answer 1

=MIN(PV(11%/12,12*15,-7000*8%/12,-5735),PV(11%/12,12*20,-7000*8%/12,-7285),PV(11%/12,12*10,-7000*8%/12,-8370),PV(11%/12,12*25,-7000*8%/12,-7000))

=5214.49173