Question

Galt Industries has just issued a callable, $1000 par value, five-year, 6% coupon bond with semiannual coupon payments. The bond can be called at par in three years or anytime thereafter on a coupon payment date. If the bond is currently trading for $978.94, then its yield to maturity is closest to:

Answer 1

6.50%

Step-by-step explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

Present value = $978.94

Face value = $1,000

PMT = 1,000 × 6% ÷ 2 = $30

NPER = 5 years × 2 = 10 years

The formula is shown below:

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

The present value come in negative

So, after solving this, the answer would be 6.50%