Thatcher Corporation's bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in 5 years at a call price of $1,050. What is their yield to maturity? What is their yield to call?

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Business

Allie Walls

6 May, 23:53

Thatcher Corporation's bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in 5 years at a call price of $1,050. What is their yield to maturity? What is their yield to call?

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Singleton · Answer 1

1a. 0.057% 1b. 2.15%

Explanation:

C = $1000*0.08 = $80 Annually = $160, F$1000, P = $1100, n=10

YTM = F-P+C/n : F+P/2

1000-1100+160/10: 1000+1100/2

=0.0057/0.057% annually

YTC=1000-1050+160/5:1000+1050/2

0.02146/2.15% Annually