Question
In: Finance
A bond has 1,000 par value , 17 years to maturity and pays a coupon of...
A
bond has 1,000 par value , 17 years to maturity and pays a coupon
of 5.25 per year semi annually. The bond is callable in 7 years at
105% of its par value. if the blnfs yield to call is 5.06% per
year, what is its annual yield to maturity
Solutions
Expert Solution
Price of the bond today
| Period | CF | [email protected]% | Disc CF |
| 1 | $ 26.25 | 0.9753 | $ 25.60 |
| 2 | $ 26.25 | 0.9513 | $ 24.97 |
| 3 | $ 26.25 | 0.9278 | $ 24.35 |
| 4 | $ 26.25 | 0.9049 | $ 23.75 |
| 5 | $ 26.25 | 0.8826 | $ 23.17 |
| 6 | $ 26.25 | 0.8608 | $ 22.60 |
| 7 | $ 26.25 | 0.8395 | $ 22.04 |
| 8 | $ 26.25 | 0.8188 | $ 21.49 |
| 9 | $ 26.25 | 0.7986 | $ 20.96 |
| 10 | $ 26.25 | 0.7789 | $ 20.45 |
| 11 | $ 26.25 | 0.7597 | $ 19.94 |
| 12 | $ 26.25 | 0.7409 | $ 19.45 |
| 13 | $ 26.25 | 0.7227 | $ 18.97 |
| 14 | $ 26.25 | 0.7048 | $ 18.50 |
| 14 | $ 1,050.00 | 0.7048 | $ 740.08 |
| Price of the bond | $1,046.33 |
YTM
| Period | CF | PVF @2% | Disc CF | PVF @2.5% | Disc CF |
| 0 | $ -1,046.33 | 1.0000 | $ -1,046.33 | 1.0000 | $ -1,046.33 |
| 1 | $ 26.25 | 0.9804 | $ 25.74 | 0.9756 | $ 25.61 |
| 2 | $ 26.25 | 0.9612 | $ 25.23 | 0.9518 | $ 24.99 |
| 3 | $ 26.25 | 0.9423 | $ 24.74 | 0.9286 | $ 24.38 |
| 4 | $ 26.25 | 0.9238 | $ 24.25 | 0.9060 | $ 23.78 |
| 5 | $ 26.25 | 0.9057 | $ 23.78 | 0.8839 | $ 23.20 |
| 6 | $ 26.25 | 0.8880 | $ 23.31 | 0.8623 | $ 22.64 |
| 7 | $ 26.25 | 0.8706 | $ 22.85 | 0.8413 | $ 22.08 |
| 8 | $ 26.25 | 0.8535 | $ 22.40 | 0.8207 | $ 21.54 |
| 9 | $ 26.25 | 0.8368 | $ 21.96 | 0.8007 | $ 21.02 |
| 10 | $ 26.25 | 0.8203 | $ 21.53 | 0.7812 | $ 20.51 |
| 11 | $ 26.25 | 0.8043 | $ 21.11 | 0.7621 | $ 20.01 |
| 12 | $ 26.25 | 0.7885 | $ 20.70 | 0.7436 | $ 19.52 |
| 13 | $ 26.25 | 0.7730 | $ 20.29 | 0.7254 | $ 19.04 |
| 14 | $ 26.25 | 0.7579 | $ 19.89 | 0.7077 | $ 18.58 |
| 15 | $ 26.25 | 0.7430 | $ 19.50 | 0.6905 | $ 18.12 |
| 16 | $ 26.25 | 0.7284 | $ 19.12 | 0.6736 | $ 17.68 |
| 17 | $ 26.25 | 0.7142 | $ 18.75 | 0.6572 | $ 17.25 |
| 18 | $ 26.25 | 0.7002 | $ 18.38 | 0.6412 | $ 16.83 |
| 19 | $ 26.25 | 0.6864 | $ 18.02 | 0.6255 | $ 16.42 |
| 20 | $ 26.25 | 0.6730 | $ 17.67 | 0.6103 | $ 16.02 |
| 21 | $ 26.25 | 0.6598 | $ 17.32 | 0.5954 | $ 15.63 |
| 22 | $ 26.25 | 0.6468 | $ 16.98 | 0.5809 | $ 15.25 |
| 23 | $ 26.25 | 0.6342 | $ 16.65 | 0.5667 | $ 14.88 |
| 24 | $ 26.25 | 0.6217 | $ 16.32 | 0.5529 | $ 14.51 |
| 25 | $ 26.25 | 0.6095 | $ 16.00 | 0.5394 | $ 14.16 |
| 26 | $ 26.25 | 0.5976 | $ 15.69 | 0.5262 | $ 13.81 |
| 27 | $ 26.25 | 0.5859 | $ 15.38 | 0.5134 | $ 13.48 |
| 28 | $ 26.25 | 0.5744 | $ 15.08 | 0.5009 | $ 13.15 |
| 29 | $ 26.25 | 0.5631 | $ 14.78 | 0.4887 | $ 12.83 |
| 30 | $ 26.25 | 0.5521 |
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