Assume that you purchased an 8 percent, 20-year, $1,000 par, semiannual payment bond priced at $1,012.50 when it has 12 years remaining until maturity. Compute: (A) yield to maturity (B) yield to call if the bond is callable in three years with an 8 percent premium.
| Yield to maturity | =RATE(nper,pmt,pv,fv)*2 | |||||
| = 7.84% | ||||||
| Where, | ||||||
| nper | = | Number of period | = | 12*2 | = | 24 |
| pmt | = | Coupon Payment | = | 1000*4% | = | 40.00 |
| pv | = | Current Price | = | -1,012.50 | ||
| fv | = | Future Value | = | 1,000.00 | ||
| Yield to call | =RATE(nper,pmt,pv,fv)*2 | |||||
| = 9.86% | ||||||
| Where, | ||||||
| nper | = | Number of period | = | 3*2 | = | 6 |
| pmt | = | Coupon Payment | = | 1000*4% | = | 40.00 |
| pv | = | Current Price | = | -1,012.50 | ||
| fv | = | Future Value | = | 1000*108% | = | 1,080.00 |
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