###
**CFA Practice Question**

Consider the following bond:

10% coupon (paid semi-annually)

Price $115.00

Callable in 10 years at $105

Par value $100

15 years until maturity

10% coupon (paid semi-annually)

Price $115.00

Callable in 10 years at $105

Par value $100

Calculate the yield to call.

A. 5.00%

B. 8.12%

C. 8%

**Explanation:**The yield to call is calculated on a semi-annual basis. Thus using your calculator, you know that PV = -$115.00 (negative number to simulate the direction of cash flows), PMT = 5 (semi-annual coupon), N=20 (number of years until call x 2), and FV = $105. At this point you are able to calculate the yield to call of 8.12% (4.058 semi-annual rate x 2).

###
**User Contributed Comments**
1

User |
Comment |
---|---|

takor |
strange that there was no distracting option of 4.06% in the answer options!:-) |