Consider a bond with a 5.1 percent coupon rate and a yield to call of 6 percent.

Question

Consider a bond with a 5.1 percent coupon rate and a yield to call of 6 percent. The bond currently sells for $1,104. If the bond is callable in 5 years, what is the call premium of the bond? (Do not round intermediate calculations. Round your final answer to 2 decimal places. Omit the "$" sign in your response.)

Consider a bond with a 5.1 percent coupon rate and a yield to call of 6 percent. The bond currently sells for $1,104. If the bond is callable in 5 years, what is the call premium of the bond? (Do not round intermediate calculations. Round your final answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Consider a bond with a 5.1 percent coupon rate and a yield to call of 6 percent. The bond currently sells for $1,104. If the bond is callable in 5 years, what is the call premium of the bond? (Do not round intermediate calculations. Round your final answer to 2 decimal places. Omit the "$" sign in your response.)

Callable Price = fv(rate,nper,pmt,pv)

Callable Price = fv(6%,5,51,-1104)

Callable Price = $ 1189.91

Call premium of the bond = (1189.91-1000)

call premium of the bond = $ 189.91

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