5.625% Notes of 5/1/24 are priced at 101.25. Based upon that price, the bonds yi

Question

5.625% Notes of 5/1/24 are priced at 101.25. Based upon that price, the bonds yield various amounts to the different call dates/prices indicated in the table below:

Date Price Yield Treas Crv

Using the information above:

1.What is the yeild to the par drop?

2.What is the spread to maturity?

3. What is the Current Yield?

4. What is the Yield to Call?

05/01/19 104.2190 6.6268 0.934 05/01/20 102.8130 5.9509 1.077 05/01/21 101.4060 5.5848 1.219 05/01/22 100.000 5.3610 1.362 05/01/24 100.000 5.4205 1.602

Explanation / Answer

yield to par is the yield / coupon rate (as the coupon rate becomes equal to yield when the bond is trading at par) at which price of the bond becomes equal to its par value

From the table above, we could see too such values of yield when the bond is becoming equal to its par value

Yield of 5.361 and yield of 5.4205 are the two respective yields to par at differents dates on 5/1/22 and 5/1/24 respectively

Spread to maturity= yield to maturity- corresonding treasury spot rate= 5.4205-1.602= 3.8185

Current yield= annual interest payment/ current bond price= 5.625%* 100/ 101.25= 0.0556=5.56%

Yield to call is the yield to the date at which the bond issuer has the right to call the bond, all the yields given in the above table at different call dates/prices are the respective yields to call on those dates at which the issuer can call the bonds at respective prices

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