A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in fi

Question

A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in five years at a call price of $1,100. The bond currently sells at a yield to maturity of 7% (3.5% per half-year). What is the yield to call? (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is the yield to call if the call price is only $1,050? (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is the yield to call if the call price is $1,100 but the bond can be called in two years instead of five years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

a)

b)

c)

Face value (FV) $                                   1,000.00 Coupon rate 8.00% Number of compounding periods per year 2 Interest per period (PMT) $                                         40.00 Number of years to maturity 30 Number of compounding periods till maturity (NPER) 60 Market rate of return/Required rate of return 7.00% Market rate of return/Required rate of return per period (RATE) 3.50% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $                                   1,124.72

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