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A callable bond pays annual interest of $5, has a par value of $100, matures in...

A callable bond pays annual interest of $5, has a par value of $100, matures in 10 years but is callable in 5 years at a price of $110, and has a value today of $106. Calculate the yield to call.

5.18%

5.27%

5.39%

5.58%

Solutions

Expert Solution

Answer:5.39%

The Yield to call can be computed using the excel function=RATE()

Here the number of years to call =5

The Face Value=$100,callable price=$110 The price of the bond =$106

The bond has a coupon payment(annual)of $5

The Yield to Call can be computed using the formula=RATE(5,B4,-B6,B1) we get YTC as 5.39%

jeff jeffy answered 2 years ago
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