Purchase Solution

Calculating YTC and YTM

Not what you're looking for?

Ask Custom Question

Taussig Corp.'s bonds currently sell for $1,150. They have a 6.75% annual coupon rate and a 15-year maturity, but they can be called in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds,
a) If the bond is called , the YTC
b) if it held till maturity, YTM

Purchase this Solution

Solution Summary

Solution describes the steps to calculate YTM and YTC.

Solution Preview

Please refer attached file for better clarity of formulas used in MS Excel.

Calculating Yield to Maturity (YTM)

Number of coupon payment left= 15
Coupon payment=6.75% of $1000=67.5
Current Price=1150

Let us see cash flows from now
Year Cash Flow
0 ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media