Bond A has a maturity of eight years, but is callable after three years. Bond A...
Bond A has a maturity of eight years, but is callable after three years. Bond A has a face value of $1000, a coupon rate of 4%, a yield to maturity of 4% (semiannual coupons) and a current price of $1,165. If the bond is called the bond owner will get $1,150. If bond A is called at three years, what is its yield to call stated as an APR?
Group of answer choices
3.02%
1.51%
2.00%
3.24%
Homework Answers
| K = Time to callx2 |
| Bond Price =∑ [(Semi Annual Coupon)/(1 + YTC/2)^k] + Call Price/(1 + YTC/2)^Time to callx2 |
| k=1 |
| K =3x2 |
| 1165 =∑ [(4*1000/200)/(1 + YTC/200)^k] + 1150/(1 + YTC/200)^3x2 |
| k=1 |
| YTC% = 3.02 |
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