What is the yield to call of a 20-year to maturity bond that pays a coupon rate

Question

What is the yield to call of a 20-year to maturity bond that pays a coupon rate of 14.54 percent per year price $1,075. Assume annual coupon payments. Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" has a $1,000 par value, and is currently priced at $1,375? The bond can be called back in 3 years at a call box) You should use Excel or financial calculator. Your Answer Answer units Save Page 1 of 25 Next Page Go to Submit Quiz Save All Responses

Explanation / Answer

Yeild to call = Annual Intrest + [(Call price -market Price)/No of years to call]   /[(call price +market Price)/2] Annual interest =$1000*14.54% =$145.40 Call price - Market Price / No of years to call =($1075 - $1375)/3 = - $100 Call price + market Price   /2 =$1075+$1375 /2 =$2450/2 =$1225 Yeild to call =($145.40 - $100) /$1225 =$45.40/$1225 =0.0371 =3.71%

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