A company has an 6.5% coupon bond outstanding. The bond matures exactly 15 years from today and has a $1,000 face value. Yesterday, October 22, 2009, the company paid its semi-annual interest payment (The bond pays semi-annual interest). The next interest payment will be paid exactly 6 months from today. Today, October 23, 2009, you pay $850.00 for this bond. The bond is callable on or after October 22, 2012 at a call price of 104.125 ($1,041.25).
A. Compute the yield to call, if the bond is called on October 22, 2012.
B. Compute the yield to maturity.
The solution explains how to calculate the yield to call and yield to maturity