Reference: Joseph M. Belth, Life
Bonds
Example: Yield to Maturity and Yield to Call. On March 16, 2003 you consider the purchase of a $1,000 bond that was issued on January 1, 2001. It has a 10.5% semiannual coupon using a 30/360 calendar, and matures on January 1, 2031. The bond is callable on January 1, 2006 at 110 (that is, $1,100). The bond is now selling at 115.174 (that is, $1,151.74). Determine both the yield to maturity and the yield to call for this bond.
First, calculate the yield to maturity:
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@c | | Clears variables; sets | |||||||||
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3.162003 | | | Stores today as | ||||||||
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1.012031 | | | Stores maturity date. | ||||||||
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10.5 | |
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115.174 | | | only two decimal | ||||||||
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14: Additional Examples 215
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