A bond has a $1,000 par value, 19 years to maturity, and pays a coupon of 5.75% per year, semiannually. The bond can be called in four years at $1,085. If the bond’s current yield is 5.54% per year, what is its yield to call?
Question 10 options:









E) 6.56%
Step1:Calculation of current Price  
Current Price  =  Annual coupon  /  Current Yield  
=  $ 57.50  /  5.54%  
=  $ 1,037.91  
Working:  
Annual coupon  =  face value  *  Coupon Rate  
=  $ 1,000.00  *  5.75%  
=  $ 57.50  
Step2:Calculation of yield to call  
Yield to call  =rate(nper,pmt,pv,fv)*2  
= 6.55%  
Where,  
nper  =  4*2  =  8  
pmt  =  1000*5.75%*6/12  =  $ 28.75  
pv  =  $ 1,037.91  
fv  =  $ 1,085.00  
Get Answers For Free
Most questions answered within 1 hours.