Determine the yield-to-call (to nearest 0.1 of a percent) of an LTV bond with a 14 percent coupon, that pays interest semiannually.The bond can be called in 7 years, has a call premium of $140, and is currently selling for $1154.
A)12.0%
B)16.2%
C)13.7%
D)14%

Question

Quizplus · Accepted Answer

Because the bond is selling for a premium, the YTC must be less than 14 percent.
Try 12 percent:
P = $70(9.295) + $1140(0.442) = $1,154.53
or using a calculator: N = 7
PV = -1154
PMT = 140
FV = 1140
Solve for I = 12.01%

Determine the Yield-To-Call (To Nearest 0