A 10 percent coupon bond has 15 years to maturity and could be called in two years. If the bond is called, investors will earn 4 percent. The call premium is one year of coupon payments. If coupon payments are made annually and par value is $1,000, what is the bond's yield to maturity?

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The bond's yield to maturity (YTM) is calculated based on the bond's annual coupon payment, the number of years to maturity, and the par value. Given the bond's annual coupon payment of $100 (10% of $1,000), 15 years to maturity, and a par value of $1,000, the YTM is approximately 7.65 percent.

A 10 Percent Coupon Bond Has 15 Years to Maturity