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Tosh. Inc.'s bonds currently sell for $980 and have a par value of $1,000. They pay a $95 annual coupon and have a 12-year maturity, but they can be called in 3 years at $1,150. What is their yield to call (YTC)?

Respuesta :

jmonterrozar

Answer:

14.24%

Step-by-step explanation:

We have found that the yield to call (YTC) formula is:

YTC = [C + (F-P) / N] / [(F + P) / 2]

Where:

C = Periodic coupon amount = 95

P = Current Price = 980

F = Redemption amount = 1150

N = time left to redemption = 3

We replace:

YTC = [95 + (1150-980) / 3] / [(1150 + 980) / 2]

YTC = 0.1424

In other words, the yield to call (YTC) is equal to 14.24%

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