Ask Question
15 October, 22:38

RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.'s bonds?

+1
Answers (1)
  1. 16 October, 02:24
    0
    YTM = 16.55%

    Explanation:

    RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.'s bonds?

    YTM = n th root of (Current Price/Face Value) - 1

    where:

    n=number of years to maturity = 18 years

    Face value=bond's maturity value or par value = $1,000

    Current price=the bond's price today = $950.35

    18√ (950.35/1000) - 1

    YTM = 16.55 %
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers