A company issues a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one

Question

2 years ago

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A company issues a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one

year after release or any time after that on a coupon payment date. On release, it has a price of $104 per $100 of face value. What is the yield to maturity of this bond when it is released? A) 0.60% B) 1.92% C) 4.00% D) 5.47%

Business

1 answer:

g100num [7] · Answer 1 · 2022-07-24T02:39:27+03:00

Answer:

B) 1.92%

Explanation:

For computing the yield to maturity we need to apply the RATE formula i.e to be shown in the attachment

Given that,

Present value = $104

Future value or Face value = $100

PMT = $100 × 6% = $6

NPER = 1

The formula is shown below:

= Rate(NPER;PMT;-PV;FV;type)

The present value come in negative

After applying the above formula, the yield to maturity is 1.92%