A 15-year bond with a 10 percent semiannual coupon has a par value of $1,000. The bond may be called after 10 years at a call price of $1,050. The bond has a nominal yield to call of 6.5 percent. What is the bond's yield to maturity, stated on a nominal, or annual basis?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is calculated based on the bond's current price, coupon payments, and time to maturity. Given the bond's nominal yield to call is 6.5%, and considering the bond's coupon rate and call price, the YTM is slightly higher, calculated to be approximately 6.95% on an annual basis.

A 15-Year Bond with a 10 Percent Semiannual Coupon Has