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Financial Management: keystrokes on a TI BA II to solve a YTM, YTC bond problem

I need the sequence of keystrokes on a TI BA II Plus to solve the following practice problem. Also, briefly walk me through the solution.

You plan to purchase a bond that was issued on January 1, 2000. It is now January 1, 2005. The bond has an 8% annual coupon rate and a 25-year original maturity. The bond has 5-year call protection until December 31, 2004. After that the bond can be called at 107.5. Interest rates have declined and the bond now sells for 115.5% of par. You must find the YTM and YTC.

1. Calculate the YTM in Year 2005 for the bond.
Calculate the YTC.
2. Which return would it earn?
Why?
3. Assuming that the bond is being sold at a discount, would the YTM or YTC be more relevant? Why?

Solution Preview

1. Calculate the YTM in Year 2005 for the bond. Calculate the YTC.

Assuming the coupon is paid annually.
Calculate YTM:
PV= -115.5 N=25-5=20 FV=100 PMT=8 - > CPT I/Y= 6.58%
YTM < coupon rate
It is sold at premium.

Calculate YTC:
I'm not sure whether the question is right itself. Because we need the original issuing price to ...

Solution Summary

The solution explains the steps on a financial calculator, but also walks through the problem with explanation and answers for better understanding.

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