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Q3: A 10 years $1000 callable bond trades at $950. The bond pays 6% coupon. The...

Q3: A 10 years $1000 callable bond trades at $950. The bond pays 6% coupon. The bond is callable after 7 years at $1050. Find out the annualized yield to maturity and yield to call. Will the call option be exercised?

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Answer #1

Cal:

Where,

nper is periods to maturity/call,

pmt is payment per period,

pv is current price

fv is redemption price of bond

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