Question

Mercy Corporation's bonds have 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,050. What is the bond's nominal yield to call?

please show all work

Answer 1

5.27%

Yield to call	=rate(nper,pmt,pv,fv)*2
		= 5.27%
Where,
nper	=	Semi annual periods	=	6*2	=	12
pmt	=	Semi annual coupon	=	$         43.75
pv	=	Initial Price		=	$ -1,213.55
fv	=	Maturity Value		=	$   1,050.00
Working:
Initial Price	=-pv(rate,nper,pmt,fv)	Where,
	= $ 1,213.55			rate	=	6.50%/2	=	0.0325
				nper	=	15*2	=	30
				pmt	=	1000*8.75%*6/12	=	$       43.75
				fv			=	$ 1,000.00