Question

A corporate bond pays interest annually and has 4 years to maturity, a face value of $1,000 and a coupon rate of 3.7%. The bond's current price is $1,007.35. It is callable at a call price of $1,050 in one year. Attempt 1/3 for 10 pts. Part 1 What is the bond's yield to maturity? 3.5% Correct ✓ Attempt 3/3 for 6 pts. Part 2 What is the bond's yield to call? 3+ decimals part two pleae fast

Answer 1

1.

FV = 1000

PMT = 1000 * 3.7% = 37

Nper = 4

PV = 1007.35

Yield to maturity can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(4,37,-1007.35,1000)
= 3.50%

Yield to maturity = 3.50% or 3.5%

2.

Nper = 1

PMT = 1000 * 3.7% = 37

PV = 1007.35

FV = 1050

Yield to call can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(1,37,-1007.35,1050)
= 0.0791 or 7.907%

Yield to call = 7.907% or 0.079

Note : Round the answer as per requirement.