Question

Compute the YTC for the FGH Company bond maturing in 12 years (7 percent coupon rate and a face value of $1000) with the call provision of "after 7 at 115" and a market price of 985.

Enter your answer as a percentage without %

Answer 1

K = Time to call

Bond Price =∑ [(Annual Coupon)/(1 + YTC)^k]     +   Call Price/(1 + YTC)^Time to call

k=1

K =7

985 =∑ [(7*1000/100)/(1 + YTC/100)^k]     +   1150/(1 + YTC/100)^7

k=1

YTC% = 8.93