Final answer:
To calculate the yield to maturity of a $99 priced bond with a 5% coupon rate and semiannual payments, the current price must be equated with the present value of all future coupon payments and the bond's face value. A financial calculator is required due to the complexity of the calculation.
Step-by-step explanation:
The yield to maturity (YTM) of Company A's callable bond, which is currently priced at $99 and has a 5% coupon rate with semiannual payments, can be calculated through a financial formula that takes into account the present value of all future coupon payments and the face value of the bond. Since it's a callable bond, the calculation might also consider the potential call feature, but since the question is strictly asking for the yield to maturity, we don't need to factor in the callability of the bond at two years for this particular calculation.
The YTM is found by solving for the interest rate that equates the present value of the bond's future cash flows to its current price. This requires a financial calculator or software that can handle the iterative process needed to determine YTM, and is beyond the scope of a simple explanation. However, to provide some guidance, the coupon payments will be $25 (5% of $1,000 face value divided by 2 for semiannual payments), and there will be six of these payments over the three-year period until maturity. Additionally, the investor will receive the face value of $1,000 at the end of the bond's term. The bond's YTM will reflect the total return an investor expects to receive, taking into account interest payments and the gain or loss realized upon maturity.