Question

h&M has just issued a callable (at par) 9 year, 9% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $96 per $100 face value. What is the bond's yield to call?

Apple has just issued a callable (at par) 9 year, 15% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $105 per $102 face value. What is the bond's yield to call?

Answer 1

1) h&M has just issued a callable

gven,

face value = $100

current price = $96

coupon rate = 9%

nper ( call term) = 1

coupon payment = 9%*100

= $9

nper = 1

bonds yield to call = RATE ( nper, pmt, pv, fv)

= 13.54%

2) given,

face value = $100

current price = $105

nper ( call term ) = 1

coupon rate = 15%

coupon payment = 15%*100

= $15

bonds yields to call = RATE ( nper, pmt, pv, fv)

= 9.52%