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Sadik Inc.'s bonds currently sell for $1,190 and have a par value of $1,000. They pay...

Sadik Inc.'s bonds currently sell for $1,190 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)?

a.

8.95%
b.

8.35%
c.

7.52%
d.

6.24%
e.

9.33%
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Homework Answers

Answer #1

YTC is the return that provided by bond till it is called.

YTC = Rate at which least +ve NPV + [ NPV at that rate / change in NPV due to inc of 1% ] * 1%

= 7% + [ 24.81 / 46.93 ] * 1%

= 7% + 0.52%

= 7.52%

Option C is correct

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