Asked by Maddi Coones on Jul 05, 2024
Verified
A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________.
A) 6%
B) 6.58%
C) 7.2%
D) 8%
Callable Bond
A type of bond that gives the issuer the right to redeem the bond at a predetermined price before its maturity date.
Yield To Call
The rate of return anticipated on a bond if it is held until the call date, before the bond's maturity date.
Par Value
The face value of a bond or stock, representing the amount the issuer will return to the holder at maturity.
- Master the concept of yield to call and its calculations.
Verified Answer
KM
Karan MohanJul 11, 2024
Final Answer :
A
Explanation :
1,055.84 = 60 
+ 
; r = 6.00%
Calculator entries are N = 10, PV = −1,055.84, PMT = 60, FV = 1,100, CPT I/Y → 6
+ ; r = 6.00%Calculator entries are N = 10, PV = −1,055.84, PMT = 60, FV = 1,100, CPT I/Y → 6
Learning Objectives
- Master the concept of yield to call and its calculations.