Question

Sadik Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?

A. 6.39%
B. 6.72%
C. 7.08%
D. 7.45%
E. 7.82%

Answer 1

D. 7.45%

Explanation:

The computation of the yield to call is shown below:

Given that

NPER 5

Present value $1,280

PMT $135

Future value $1,050

The formula is shown below:

= RATE(NPER;PMT;-PV;FV;TYPE)

The present value comes in negative

After applying the above formula, the yield to call is 7.45%

hence, the correct option is d.