IBM has just issued a callable (at par) 5 year, 9% coupon bond with quarterly coupon...

IBM has just issued a callable (at par) 5 year, 9% coupon bond with quarterly coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date. It has a price of $102 per $100 face value, implying a yield to maturity of 8.78%. What is the bond's yield to call?

		8.78%
		6.86%
		8.15%
		7.91%

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Expert Solution

Bond's yield to call is calculated using the RATE function:

=RATE(nper,pmt,pv,fv)

=RATE(2*4,9%/4*100,-102,100)*4

=7.91%

nper is periods to call,

pmt is payment per period,

pv is current price

fv is redemption price of bond

jeff jeffy answered 2 years ago

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