Consider the following information for a bond: A semiannual coupon bond that pays a 5

Finance Nov 13, 2020

Consider the following information for a bond: A semiannual coupon bond that pays a 5.0096 coupon (annual rate), has a par value of $1,000.00. matures in 40 years, and is selling today at a premium of $198.72 from the par value. The bond has a call feature that allows the company to call the bond back after 15 years (leaving 25 years of maturity for the bond) at a callable par value of $1,025.00. What is the yield to call (YTC) on this bond? 19.8795 4.00% 3.4296 4.1796 5.2295c

Expert Solution

Semi annual coupon = [(5 / 100) * 1000] / 2 = 25

Price = 1000 + 198.72 = 1198.72

Number of periods = 15 * 2 = 30

Yield to call = 3.42%

Keys to use in a financial calculator:

2nd P/Y 2

FV 1025

PV -1198.72

N 30

PMT 25

CPT I/Y

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