Bond Yields and Rates of Return A 15-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,075. The bond sells for $1,050. (Assume that the bond has just been issued.) What is the bond’s yield to maturity?

The yield to maturity (YTM) of a bond is the rate of return that an investor would receive if they held the security until it matures. In order to determine the YTM for this particular 15-year, 14% semiannual coupon bond we must first calculate its current market price.

Using the data provided, since this is a newly issued bond with a par value of $1,000 and callable in four years at $1,075 then we can conclude from this that it has been discounted by 6.7% which means that its current market price should be equal to ($1000 – 0.067 * 1000). This comes out to $930 and so when coupled with the fact that it is currently selling for $1,050 then we can determine that its YTM is 7%.

It is important here to note however that yields are always subject to change based on prevailing market conditions so any estimates should only be considered as temporary at best as they may not necessarily hold up over longer periods of time.

In conclusion, by taking into account both the par value and current call price of this hypothetical 15-year bond along with its existing market value we were able calculate its approximate yield to maturity which came out to 7%.ents the total NPV.

This highlights the importance of understanding the weighted average cost of capital (WACC) and making sure that it is taken into consideration when assessing potential projects or investments. WACC can have a significant impact on both short-term and long-term profitability, so it should be carefully monitored to ensure that a company’s financial goals are maintained.