Keenan Industries has a bond outstanding with 15 years to maturity,an 8.25% nominal coupon,semiannual payments,and a $1,000 par value.The bond has a 6.50% nominal yield to maturity,but it can be called in 6 years at a price of $1,085.What is the bond's nominal yield to call?

Question

Quizplus · Accepted Answer

The nominal yield to call is calculated by finding the interest rate that equates the present value of the bond's cash flows (coupon payments and call price) to its current price, assuming it is called at the earliest opportunity. Given the bond's semiannual coupon payments and call price, the yield to call is approximately 6.10%.

Keenan Industries Has a Bond Outstanding with 15 Years to Maturity,an