Calculating YTM and YTC
Not what you're looking for?
Delta Industries has just issued callable ten-year, 8% coupon bonds with semi-annual coupon payments. The bonds can be called at par in four years or anytime thereafter on a coupon payment date. The current bond price is $1000. For an investment today in these bonds (assuming no transaction costs):
a. What is an investor's Yield to Maturity?
b. What is an investor's Yield to Call?
Two years ago, Delta Industries issued callable fifteen-year, 7% coupon bonds at par value of $1,000 per bond with annual coupon payments. The bonds have just completed their second coupon payment. The bonds can be called at par five years from the date of issue or anytime thereafter on a coupon payment date. It has a current price of $1100. For an investment today in one of these bonds (assuming $15 in transaction costs):
c. What is an investor's Yield to Maturity?
d. What is an investor's Yield to Call?
Purchase this Solution
Solution Summary
Solution describes the steps to calculate yield to maturity(YTM) and yield to call (YTC) for a callable coupon paying bond.
Solution Preview
Please refer attached file for better understanding of functions.
Solution:
a. What is an investor's Yield to Maturity?
Face Value of bond=1000
Price of bond=1000
Semi annual coupon=40
Since bond is available at par, yield to maturity is equal to coupon rate i.e. 8%
b. What is an investor's Yield to Call?
Since bond is available at par and can be called at par, yield to call is equal to coupon rate i.e. 8%
Two ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.