Answer:
The yield to call for this bond is 9.30%
Explanation:
Yield to call
The rate of return bondholders receives on a callable bond until the call date is called Yield to call.
Now use the following formula to calculate the Yield to call
Yield to Call = [ C + ( F - P ) / n ] / [ ( F + P ) / 2 ]
Where
F = Face value = $1,000 ( Assumed )
C = Coupon Payment = Face value x Coupon rate = $1,000 x 10.4% = $104
P = Call price of the bond = Face value + Call Premium = $1,000 + $75 = $1,075
n = Numbers of years to call = 10 years
Placing vlaues in the formula
Yield to Call = [ $104 + ( $1,000 - $1,075 ) / 10 years ] / [ ( $1,000 + $1,075 ) / 2 ]
Yield to Call = 0.0930
Yield to Call = 9.30%
