A 10% coupon bond with annual payments and 10 years to maturity is callable in three years at a call price of $1,100. If the bond is selling today for $975, the yield to call is

A) 10.26%.
B) 10.00%.
C) 9.25%.
D) 13.98%.
E) None of the options are correct.

Question

Nikki Makukutu · Accepted Answer

Final Answer : D, Explanation :  The yield to call is calculated based on the bond being called at the earliest opportunity, which is in three years at the call price of $1,100. Given the bond's current price of $975, the yield to call is higher than the coupon rate due to the bond being sold at a discount and the call price being above par. Calculating the yield to call using these parameters results in approximately 13.98%.

A 10% coupon bond with annual payments and 10 years to maturity is callable in three years at a call price of $1,100. If the bond is selling today for $975, the yield to call is

A) 10.26%.
B) 10.00%.
C) 9.25%.
D) 13.98%.
E) None of the options are correct.

Definitions

Learning Objectives

Learning Objectives

Related questions

A 10% coupon bond with annual payments and 10 years to maturity is callable in three years at a call price of $1,100. If the bond is selling today for $975, the yield to call isA) 10.26%.B) 10.00%.C) 9.25%.D) 13.98%.E) None of the options are correct.

Definitions

Learning Objectives

Learning Objectives

Related questions

A 10% coupon bond with annual payments and 10 years to maturity is callable in three years at a call price of $1,100. If the bond is selling today for $975, the yield to call is

A) 10.26%.
B) 10.00%.
C) 9.25%.
D) 13.98%.
E) None of the options are correct.