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Homework answers / question archive / A bond has 11 years to maturity, pays a 8
A bond has 11 years to maturity, pays a 8.50% annual coupon and sells today for $930. In 8 years it can be called at 112% of face value. What is its yield to call?
a) 10.87%
b) 9.80%
c) 9.56%
d) 10.23%
e) 10.18%
Computation of Yield to Call using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Call = ?
Nper = 8 years
PMT = 1000*8.50% = 85
PV = 930
FV = 1000*112% = 1120
Substituting the values in formula:
=rate(8,85,-930,1120)
Rate or Yield to Call = 10.87%
So, the correct option is A "10.87%".
