The Yield to call is 7.30%
Par value of Bond (FV) = $1,000
Annual Coupon (A) = 8%*1,000 = $80
Years until maturity = 8
Current YTM = 7.5%
We need to calculate the Current Price of Bond (PV)
PV = 80 * (P/A, 0.075, 7) + 1000 * (P/F, 0.075, 7)
PV = $1,026.48
Call Price = $1,010
Call Period = 3 years
Yield to call = ytc
1026.48 = 80* (P/A, ytc, 3) + 1010 * (P/F, ytc, 3)
Using the <em>trail and error </em>method,
Yield to call = 7.30%
In conclusion, the Yield to call is 7.30%
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