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You own a bond with the following features: face value of $1000, coupon rate of 9% (semiannual coupon), and 30 years to maturity. The bond has a current price of $1100. The bond is callable after ten years with the call price of $1090. What is the yield to call if the bond is called at ten years (state as an APR)

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Answer:

8.12%

Explanation:

For computing the yield to call, we have to applied the RATE formula i.e to be shown in the attachment below:

Given that,  

Present value = $1,100

Future value or Face value = $1,090

PMT = 1,000 × 9% ÷ 2 = $45

NPER = 10 years × 2 = 20 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after applying this formula in the spreadsheet, the yield to call is

= 4.06%  ×2

= 8.12%

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