A bond with five years remaining until maturity is currently trading for 101 per 100 of par value. The bond offers a 6% coupon rate with interest paid semiannually. The bond is first callable in three years and is callable after that date on coupon dates according to the following schedule:
End of Year | Call Price |
3 | 102 |
4 | 101 |
5 | 100 |
Question
Q. The bond’s annual yield-to-maturity is closest to:
- 2.88%.
- 5.77%.
- 5.94%.
Simply they are asking bonds ytm .
Pv -101
Pmt 3
Fv 100
N 10
Cpt i/y =2.8835*2=5.77