Yield to Maturity (YTM) and Yield to Call (YTC)
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1) Rourke Motor Co. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1000 and their current market price is $1,130.35. However, Rourke may call the bonds in 8 years at a call price of $1,060. What are the YTM and YTC on Rourke's bonds?
YTM=
YTC=
2) If interest rates are expected to remain constant, what is the best estimate of the remaining life for Rourke's bonds?
3) If Rourke issues new bonds today, what coupon rate must the bonds have to be issued at par?
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Answers questions on yield to maturity (YTM) and yield to call (YTC).
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Rourke Motor Co. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1000 and their current market price is $1,130.35. However, Rourke may call the bonds in 8 years at a call price of $1,060. What are the YTM and YTC on Rourke's bonds?
YTM= 7.64%
YTC= 7.36%
(see calculations below)
Yield to maturity
Yield to maturity can be calculated using Excel worksheet function RATE
Data
No ...
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