Question

A bond has a $1,000 par value, 16 years to maturity, and pays a coupon of...

A bond has a $1,000 par value, 16 years to maturity, and pays a coupon of 6.0% per year, annually. The bond can be called in seven years at $1,150. If the bond’s yield to maturity is 6.39% per year, what is its yield to call?

Question 2 options:

A)

 8.68%

B)

 8.87%

C)

 8.11%

D)

 8.41%

E)

 7.87%
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Homework Answers

Answer #1

Price of the bond is $961.62 using PV function of Excel.

Yield to Call = 8.41% (rounded) using RATE function of Excel.

The answer is Option D given.

Calculations as follows:

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