Finance questions....
Business & Finance

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1.Sadik Inc.'s bonds currently sell for $1,270 and have a par value of $1,000. They pay a $105 annual coupon and have a 15year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)?
2.A 25year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?
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A 25year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?
First you have to calculate the current yield to maturity. You do this by solving for the RATE function using the following criteria:
Number of Periods = 25
Annual Payment = $85 ($1,000 X 8.5%)
Future Value $1,000
Present Value $875
The RATE calculates to 9.863%
Now calculate the Present Value using this criteria
Future Value $1,000
Number of Periods = 20 (25  5)
Annual Payment = $85 ($1,000 X 8.5%)
RATE = 9.863%
The Present Value calculates to $882.90
So in five years, the bond will sell for $882.90
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