A 15-year maturity, 7.5% coupon bond paying coupons semiannually is callable in

Question

A 15-year maturity, 7.5% coupon bond paying coupons semiannually is callable in 5 years at a call price of $1,100. The bond currently sells at a yield to maturity of 6% (3% per half-year).

a. What is the yield to call annually? (Do not round intermediate calculations. Round your answer to 3 decimal places.

b. What is the yield to call annually if the call price is only $1,050? (Do not round intermediate calculations. Round your answer to 3 decimal places.

c. What is the yield to call annually if the call price is $1,100, but the bond can be called in 2 years instead of 5 years? (Do not round intermediate calculations. Round your answer to 3 decimal places.

Explanation / Answer

A. Coupon 37.5, Fv 1100, N 10, PV is 1147, so yield to call is 5.82%

B.

Coupon 37.5, Fv 1050, N 10, PV is 1147, so yield to call is 5.03%

C.

Coupon 37.5, Fv 1100, N 4, PV is 1147, so yield to call is 4.56%

For cakculating current price n is 30 coupon is 37.5, fv is 1000, yiekd is 3%

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