Question

Settlement Date=		5/12/2013
Maturity Date=		5/12/2023
Coupon Rate=		8.000%
Current Market Price=		94.00
Redemption value at Maturity %=		100
Coupon Pmts per year=		2
Call Provision
Year	Call Price	Dates
Year 1 =	105	5/12/2014
Year 2 =	104	5/12/2015
Year 3 =	103	5/12/2016
Year 4 =	102	5/12/2017
Year 5 =	101	5/12/2018
YTM =
YTC (3) =
YTW =
Please use excel for this

Answer 1

Following is the YTM of the bond.YTM is simply the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity.

You can easily calculate it using the =Rate function in excel or financial calculator. The inpute have been provided in the screenshot.

Yield to call can simly be calculated just as we calculated YTM. The maturity would be now 3 years so N changes to 6(3*2) and the future price changes to 103 as it would be called back at 103.

The YTW is the lowest of yield to maturity or yield to call (if the bond has prepayment provisions).

So if we compare all the Yields in the given two screenshots. The lowest is the YTM 8.92%. Hence, it is the Yield to worst.