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1.     A 25-year maturity, 8% coupon bond paying coupons semiannually is callable in 10 years at a

call price of $1,100. The bond sells at a yield to maturity of 6.5%, or 3.25% per half-year.


a.     What is the yield to call? At what yield to maturity would you expect the bond to be called after ten years?


I solved for the YTC accurately using a financial calculator as follows:


Bond price:

N=50

I=3.25

PMT=40

FV=1000

Thus PV=-1184.14


Find the YTC:

N=20

PV=-1184.14

PMT=40

FV=1100

Thus, I/Y=3.12% or 6.23% annually.


How do I find the yield to maturity after 10 years?

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