An 8% Coupon Municipal Bond Has 15 Years Left to Maturity

An 8% coupon municipal bond has 15 years left to maturity and has a price quote of 102.0. The bond can be called in 6 years. The call premium is one year of coupon payments. Compute the bond's yield to call and determine if the bond will be called. Assume interest payments are paid semiannually and a par value of $5,000.

A) 4.31%; Yes, the bond will be called.
B) 8.62%; Yes, the bond will be called.
C) 8.62%; No, the bond will not be called.
D) 11.21%; No the bond will not be called.Step 1: N = 12; PMT = 200; PV = 5100; FV = 5400; => I = 4.31; YTC = 2 * 4.31 = 8.62.