Assume a bond with the following parameters: What is it's Yield to Call? Par Value $1,000...

Question

Question

Assume a bond with the following parameters: What is it's Yield to Call?

Par Value $1,000 Call

Premium $75 Coupon

Rate 8.00%

Payments are Made Semi-Annually

Years to Maturity 20

Years to Call 10

Current Market Price $1,350

Answer 1

Answer #1

K = Time to callx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTC/2)^k] + Call Price/(1 + YTC/2)^Time to callx2

k=1

K =10x2

1350 =∑ [(8*1000/200)/(1 + YTC/200)^k] + 1075/(1 + YTC/200)^10x2

k=1

YTC% = 4.27

Answer 2

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