100
. Yield to call--semiannual bond Answer: b Diff: M
First, calculate the bond price as follows: N = 20 2 = 40; I = 7/2 = 3.5; PMT = 0.08/2 1,000 = 40; FV = 1000; and then solve for PV =
-$1,106.78. VB = $1,106.78.
Now, we can calculate the YTC as follows, recognizing that the bond can be called in 6 years at a call price of 115% 1,000 = 1,150: N = 6 2 = 12; PV = -1106.78; PMT = 40; FV = 1150; and then solve for I = 3.8758% 2 = 7.75%.
101 . Yield to call--semiannual bond Answer: d Diff: M
Find the current bond price using the YTM:
N = 12 2 = 24; I = 9/2 = 4.5; PMT = 100/2 = 50; FV = 1000; and then solve for PV = -$1,072.48. VB = $1,072.48.
Solve for the YTC:
N = 5 2 = 10; PV = -1072.48; PMT = 50; FV = 1050; I = 4.49% 2 = 8.98%.
102 . Yield to call--semiannual bond Answer: c Diff: M
First calculate the bond price:
N = 2 20 = 40; I/YR = 9/2 = 4.5; PMT = 110/2 = 55; FV = 1000; and then solve for PV = -$1,184.02. VB = $1,184.02.
Now, solve for the YTC:
N = 2 10 = 20; PV = -1184.02; PMT = 55; FV = 1055; and then solve for I/YR = 4.29% 2 = 8.58%.
103 . Yield to call--semiannual bond Answer: b Diff: M
First we need to find the bond price:
N = 12 2 = 24; I = 10/2 = 5; PMT = 60; FV = 1000; and then solve for PV = -$1,137.99. VB = $1,137.99.
Now use the bond price to figure the YTC:
N = 8 2 = 16; PV = -1137.99; PMT = 60; FV = 1050; and then solve for
I = 4.9441% 2 = 9.8883% 9.89%.
104 . Yield to call--semiannual bond Answer: c Diff: M
Step 1: Find the bond price today, if held to maturity:
Enter the following input data into the calculator:
N = 24, I = 7/2 = 3.5, PMT = 50, FV = 1000, and then solve for PV = -$1,240.88. VB = $1,240.88.
Step 2: Calculate the yield to call:
Enter the following input data into the calculator:
N = 10, PV = -1240.88, PMT = 50, FV = 1050, and then solve for I = 2.667%.
However, this is a six-month rate, not a one-year rate. To find the nominal yield to call, just multiply this rate by 2: 2.667% 2 = 5.33%.
105 . Yield to call--semiannual bond Answer: c Diff: M
Step 1: Find the bond price today if it is not called:
N = 24; I = 3; PMT = 40; FV = 1000; and then solve for PV =
-$1,169.36. VB = $1,169.36.
Step 2: Find the yield to call:
N = 10; PV = -1169.36; PMT = 40; FV = 1040; and then solve for I = 2.43%.
This is the nominal rate for 6 months. The annual nominal rate is 2 2.43% = 4.86%.
106. Yield to call--semiannual bond Answer: b Diff: M N
Enter the following data as inputs in your calculator:
N = 2 5 = 10; PV = -1075; PMT = 0.09/2 1,000 = 45; FV = 1035; and then solve for I = kd/2 = 3.8743%.
Since this is a 6-month rate, just multiply by 2 to solve for the nominal yield to call. I = k d = 2 3.8743% = 7.7486% 7.75%.
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