Final answer:
The nominal yield to call (YTC) calculation involves finding the equivalent semiannual yield that equates the present value of the bond's cash flows until the call date with its current trading price. The bond's coupon rate, call price, and number of coupon payments until the call date are taken into account for this calculation.
Step-by-step explanation:
The student is asking about how to calculate the nominal yield to call (YTC) of a bond. A bond's YTC is the return a bondholder gets if the bond is held until its call date, in this case, 5 years from now, rather than the full maturity period of 30 years. The bond has a nominal coupon rate of 6.0%, with semiannual payments and a par value of $1,000. If the bond can be called at $1,050 in 5 years and the nominal yield to maturity (YTM) is 5.50%, determining the YTC would involve calculating the total return received if the bond is called and then finding the equivalent semiannual yield that makes the present value of these cash flows equal to the current price of the bond.
Given the semiannual coupon, the bond will deliver 10 coupon payments of $30 (which is half of the 6% annual interest on the $1,000 par value) before it can be called. At the call date, the holder would receive the call price of $1,050. The YTC calculation would take these payments into account and solve for the yield that equalizes the present value of these cash flows with the bond's current trading price, which should reflect the market's expected YTC given the current interest rate environment. However, with the information provided in the question, there appears to be missing data such as the bond's current trading price. Without this or additional details related to the bond's price or a method to calculate it, the YTC cannot be provided.