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    Yield to call, Yield to maturity

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    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.

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    Solution Summary

    The solution explains how to calculate the yield to call and yield to maturity