Question

Yes They May, Inc. has a bond issue outstanding with a $1,000 par value and a maturity of 31 years. The bonds have an annual coupon rate of 16.0% with semi-annual coupon payments. The current market price for the bonds is $1,090. The bonds may be called in 3 years for 116.0% of par. What is the quoted annual yield-to-maturity for the bonds?

Answer #1

K = Nx2 |

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |

k=1 |

K =31x2 |

1090 =∑ [(16*1000/200)/(1 + YTM/200)^k] + 1000/(1 + YTM/200)^31x2 |

k=1 |

YTM = 14.665%

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