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Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon...

Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon rate of 12% paid semiannually. The bonds are currently selling for $1,160. The bonds may be called in 4 years for 112 per 100 of par. What is your expected rate of return if the bond is called in 4 years? (yield to call) I don't know what I'm doing wrong plz do it in excel using the yield function. thank you

Solutions

Expert Solution

FV = 1000 * 112 / 100 = 1120
PV = 1160
Nper = 4 * 2 = 8
PMT = 1000 * 12% / 2 = 60

Yield to call can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(8,60,-1160,1120)*2
= 9.62%


Yield to call = 9.62%

OR

By using YIELD Function:

EXCEL FORMULA:

jeff jeffy answered 2 years ago
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