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A corporation issues a 20 year bond with the final redemption value equal to the face...

A corporation issues a 20 year bond with the final redemption value equal to the face value of $1000, and semiannual coupons of 6.5%. However, the bond is callable at the end of 10 years at $1100, and at the end of 15 years at $1040. What is the price of the bond if the investor’s yield (the “yield-to-worst”) is 4.5%?
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Answer:

Semiannual Interest : 1000*6.5% 6/12 = 32.5

semiannual yield :4.5*6/12= 2.25%

semiannual months : 20 *2 = 40

Price Of Bond : [PVA 2.25%,40* Interest ] + [PVF 2.25% ,40 * Face value]

                 = 851.29 + 410.65

= 1376.73

Note: PVA and PVF has been calculated using the financial calculator

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