An 8 Percent Coupon Municipal Bond Has 15 Years Left

An 8 percent coupon municipal bond has 15 years left to maturity and has a price quote of 98.5. The bond can be called in six years. The call premium is one year of coupon payments. Compute the bond's yield to call and determine if the bond will be called. Assume interest payments are paid semiannually and a par value of $5,000.

A) 4.68 percent; Yes, the bond will be called.
B) 9.36 percent; Yes, the bond will be called.
C) 9.36 percent; No, the bond will not be called.
D) 10.71 percent; No, the bond will not be called.Step 1: N = 12; PMT = 200; PV = 4925; FV = 5400; => I = 4.68; YTC = 2 * 4.68 = 9.36.