Meacham Enterprises' bonds currently sell for $1,280 and have a par value of $1,000

Finance Oct 08, 2020

Meacham Enterprises' bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 7 years at $1,050. What is their yield to call (YTC)?

Expert Solution

We can calculate the yield to call by using the following formula in excel:-

=rate(nper,pmt,-pv,fv)

Here,

Rate = Yield to call

Nper = 7 periods

Pmt = Annual coupon payments = $135

PV = $1,280

FV = $1,050

Substituting the values in formula:

= rate(7,135,-1280,1050)

= 8.57%

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