Question

Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100.The bonds are callable in 5 years at a call price of $1,050. What is their yield to maturity? What is their yield to call?

Answer 1

Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of thebonds is $1,100. The bonds are callable in 5 years at a call price of $1,050. What is their yield to maturity? What is their yield to call?

What is their yield to maturity?

N=20

PMT= 40

PV=-11OO

FV=1000

i=?

i/2= 3.3o%

i=6.617%

YTM= 6.62%

What is their yield to call?

N=9

PMT= 40

PV=-11OO

FV=1050

i=?

i/2= 3.19%

i=6.617%

YTM= 6.38%