Keenan Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's nominal yield to call?  The answer is5.59% I want to know the formula to calculate by the financial calculator. Thanks

Question
Asked Oct 16, 2019
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Keenan Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's nominal yield to call?
 
 
The answer is
5.59%
 
I want to know the formula to calculate by the financial calculator. Thanks
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Expert Answer

Step 1

Following information’s are given in the question:

Face value
$1,000
Coupon rate
Years to maturity
Call price
8.25%
15 years
$1,045
6 years
Semi-annually
Years until call date
Compounding
help_outline

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Face value $1,000 Coupon rate Years to maturity Call price 8.25% 15 years $1,045 6 years Semi-annually Years until call date Compounding

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Step 2

Step-1

By using financial calculator:

...
FV 1,000
N 2 x 15
= 30
8.25%
PMT 1,000 x
2
-41.25
6.50
Y 2
= 3.25
Click CPT
Click PV 1166.09 and it is the current bond price
help_outline

Image Transcriptionclose

FV 1,000 N 2 x 15 = 30 8.25% PMT 1,000 x 2 -41.25 6.50 Y 2 = 3.25 Click CPT Click PV 1166.09 and it is the current bond price

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