Question

What is the yield to cali for a $1,000 par, 30 year, 9% coupon bond with seni-athoul payments, calable in 2 years at a cal prike of $1,100 that setls for $1,200 ? 3.44x 550x 6.025 2ses

Answer 1

The yield to call for the bond is approximately 9.25%.

The yield to call for a bond, we need to use the bond's current price, call price, years to call, coupon rate, and par value.

The bond has a par value of $1,000, a coupon rate of 9%, and is callable in 2 years at a call price of $1,100.

It settles for a price of $1,200. Using these values,

The yield to call using the formula:

Yield to Call = (Coupon Payment + (Call Price - Current Price) / Years to Call) / ((Call Price + Current Price) / 2)

Substituting the given values into the formula:

Yield to Call = (0.09 * 1000 + (1100 - 1200) / 2) / ((1100 + 1200) / 2)

Therefore, the equation gives us a yield to call of approximately 0.0925 or 9.25%.

Answer 2

The yield to call of the bond that pays a coupon rate of 12.93% annually is 7.08%.

Yield to call is the return on a bond if it is called by the issuer before its maturity date.

To solve for the yield to call of the 30-year to maturity bond, we are going to use the Rate Function of Excel.

It will be arranged in the tray as follows:

B1. Par value of bonds $1,000.00

B2. Coupon rate = 12.93%

B3. Current price = $1,403.00

B4. Years to call = 8

B5. Call price = $1,095.00

The yield to call = RATE(B4,B2*B1,-B3,B5)

= 0.0708

= 7.08%.

The full and correct question is:

What is the yield to call of a 30-year to maturity bond that pays a coupon rate of 12.93 percent per year, has a $1,000 par value, and is currently priced at $1,403? The bond can be called back in 8 years at a call price $1,095