Atlantis Fisheries issues zero coupon bonds on the market at a price of $501 per

Question

Atlantis Fisheries issues zero coupon bonds on the market at a price of $501 per bond. These are callable in 10 years at a call price of $560. Using semiannual compounding, what is the yield to call for these bonds? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Atlantis Fisheries issues zero coupon bonds on the market at a price of $501 per bond. These are callable in 10 years at a call price of $560. Using semiannual compounding, what is the yield to call for these bonds? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Atlantis Fisheries issues zero coupon bonds on the market at a price of $501 per bond. These are callable in 10 years at a call price of $560. Using semiannual compounding, what is the yield to call for these bonds?

YTC = rate(nper,pmt,pv,fv)*2

Nper (indicates the semi annual period) = 10*2 = 20

PV (indicates the price) = 501

PMT (indicate the semi annual payment) = 0

FV (indicates the Call value) = 560

Rate (indicates YTC) = ?

YTC = rate( 20,0,-501,560)*2

YTC = 1.12%

Alternatively

YTC =( (Call Value/Current Market Value)^(1/nper) - 1) *2

YTC = ((560/501)^(1/20) -1) *2

YTC = 1.12%

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