Question

A 5.90 percent coupon bond with 18 years left to maturity can be called in four years. The call premium is one year of coupon payments. It is offered for sale at $1,105.50. What is the yield to call of the bond? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)

Answer 1

Annual coupon = 1000* 0.059 = 59

We can use excel to calculate YTC

Year	Cash flow
0	-1105.50
1	29.5
1	29.5
2	29.5
2	29.5
3	29.5
3	29.5
4	29.5
4	1,088.5
YTC	2.18%
Annual YTM	4.36%
Formula	=IRR(B2:B10)

YTC = 4.36%

--------------------------------------------------------------------------------------------------------------------------

Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.