What is the yield to call of a 30-year to maturity bond that pays a coupon rate of 10

Finance Feb 10, 2021

What is the yield to call of a 30-year to maturity bond that pays a coupon rate of 10.65 percent per year, has a $1,000 par value, and is currently priced at $945? The bond can be called back in 4 years at a call price $1,086. Assume annual coupon payments.

Round the answer to two decimal places in percentage form.

Expert Solution

Computation of Yield to Call using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)*2

Here,

Rate = Yield to Call = ?

Nper = 4 years

PMT = $1,000*10.65% = $106.50

PV = $945

FV = $1,086

Substituting the values in formula:

=rate(4,106.50,-945,1086)

Rate or Yield to Call = 14.29%

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