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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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  1. 7 May, 02:15
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    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
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