Asked by
mohamed Meeraj
on Oct 20, 2024Verified
A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 3 years at 110% of par. What is the bond's yield to call?
A) 6.72%
B) 9.17%
C) 4.49%
D) 8.98%
Callable Bond
A type of bond that gives the issuer the right to repay the bond before its maturity date, typically at a predefined call price.
Yield to Call
The interest rate that an investor would receive if they held a callable bond until the call date.
Quoted Coupon Rate
This is the annual interest rate paid by a bond, expressed as a percentage of the bond’s face value and fixed for the bond's lifespan.
- Master the concept of yield to maturity (YTM) and yield to call (YTC) and their determinants.
Verified Answer
JG
Learning Objectives
- Master the concept of yield to maturity (YTM) and yield to call (YTC) and their determinants.