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Finding Call Period for Bond

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Mattco has 9% annual coupon, $1,000 face value bonds outstanding that mature in 10 years. However, the bonds can be called before maturity at a call price of $1,050. The bonds have a yield to call of 6.5% and a yield to maturity of 7.4%. How long until these bonds may first be called?

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Solution Summary

The solution describes the steps for calculating minimum time when the bond can be called at given call price.

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Please refer attached file for better clarity of tables and formulas.

Solution:

n = number of periods =10years
Coupon payment =1000*9%=90 dollar
YTM =7.4%

You can use Present value of $1 annuity tables for n=10 and r= 7.4% to ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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