Suppose you have a 12%,20 year bond traded at $850.If it is callable in 5 years at $1,100,what is the bond's yield to call? Interest is paid semiannually.
A) 8%
B) 9.0%
C) 18.0%
D) 9.4%
E) 16.5%

Question

Quizplus · Accepted Answer

$$850 = 60 \left( \frac { 1 - \frac { 1 } { ( 1 + i ) ^ { 10 } } } { i } \right) + \frac { 1100 } { ( 1 + i ) ^ { 10 } }$$ i = .09.Annualized i = .09 × 2 = .18.

Suppose You Have a 12%,20 Year Bond Traded at $850