Suppose you have a 10%,20 year bond traded at $1,120.If it is callable in 5 years at $1,150,what is the bond's approximate yield to call? Interest is paid quarterly.
A) 7.78%
B) 8.00%
C) 9.40%
D) 9.36%
E) 9.72%

Question

Quizplus · Accepted Answer

$$1120 = 25 \left( \frac { 1 - \frac { 1 } { ( 1 + i ) ^ { 10 } } } { i } \right) + \frac { 1150 } { ( 1 + i ) ^ { 10 } }$$ i = .0234.Annualized i = .0234 × 4 = .094

Suppose You Have a 10%,20 Year Bond Traded at $1,120