A company issues a callable (at par) 20-year, 5% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $102 per $100 of face value. What is the yield to call of this bond when it is released?

Question

Quizplus · Accepted Answer

A) Using a financial calculator, PV = -102, FV = 100, PMT = 5, N = 1;
computing interest = 2.94%; yield to call = 2.94%

A Company Issues a Callable (At Par) 20-Year, 5% Coupon