Question

the current market price of Jones Corporation's 4 percent, 5-year bonds is $950. Coupon interest payments...

the current market price of Jones Corporation's 4 percent, 5-year bonds is $950. Coupon interest payments are semiannual, and the par value is equal to $1,000. What is the YTM?

If the bond in the prior problem can be called in two years for a call price of $1,100, then what is the yield to call (YTC)?

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Answer #1

YTM can be calculated uing financial calculator or excel

given payments are semi annual

Price(PV) = 950

PMT = 1000*(4%/2) = 20

Number of periods(nper) = 5*2 = 10

redemption value(FV) = 1000

using rate function in excel:

YTM = 5.15%(rounded to two decimals)

YTC:

here everything remains same except

Number of periods(nper) = 2*2 = 4

redemption value(FV) = 1100

YTC:

YTC = 11.46%(rounded to two decimals)

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