Ask Question
4 November, 09:17

RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.'s bonds?

+5
Answers (1)
  1. 4 November, 11:45
    0
    YTM = 16.55%

    Explanation:

    RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.'s bonds?

    YTM = n th root of (Current Price/Face Value) - 1

    where:

    n=number of years to maturity = 18 years

    Face value=bond's maturity value or par value = $1,000

    Current price=the bond's price today = $950.35

    18√ (950.35/1000) - 1

    YTM = 16.55 %
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers