yield to call Q

[trader2112]

An 11 percent coupon bond with annual payments and 10 years to maturity is callable in 3 years at a call price of $1,100. If the bond is selling today for 975, the yield to call is:

A) 14.97%.


B) 10.26%.


C) 10.00%.


D) 9.25%.




The correct answer was A) 14.97%.


PMT = 110, N = 3, FV = 1,100, PV = 975

Compute I = 14.97

i keep geting the error message 5 on this one. any ideas?

thanks

 

[Dsylexic]

PMT and PV need to be of opposite signs.

rather PMT and FV are same sign. PV is opposite
choose PV = -975 and retry

 

[Danteshek]

I suspect you forgot to make PV negative. That is why you are getting error 5.

A good way to think about it is where the flow is going. Just use negative for all outflows/investments. For the returns (coupon and principal) use positive numbers.

FV = 1100
PV = -975
n = 3
PMT = 110

compute I = 14.9749..

 

[cfasf1]

sorry, thought it was just a question.

 

[Danteshek]

I hope the Qs on the exam are this easy...