Keenan Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a 4.5% call premium. What is the bond's nominal yield to call? (HINT: Step 1. Solve for the band's current market price using the YTM and all the other relevant information. Step 2. You are then ready to solve for the YTC since you have everything needed. Be careful that this is a problem ofa "semiannual" coupon bond.) '21 .1 4.42% (I ,i" 5.54% C. ,1 5.09% .ii' 5.59% CO?" 6.77% Step 1: Solve for the price of the bond. This is a problem related to semiannual coupon paying bonds. Financial Calculator: N = years to maturity x 2; PMT = (Annual coupon rate x face value (i.e. par value) of bond)/2; FV = Maturity value (i.e., face value); I/Y = investor's required rate of return (market's required rate of return)/2 CPT PV Excel Built-in PV function: =PV(rate, nper, pmt, fv,type) where rate = investor's required rate of return (market's required rate of return)/2; nper = years to maturity x 2 ; pmt = (Annual coupon rate x face value (i.e. par value) of bond)/2; fv = Maturity value (i.e., face value). We can either assign 0 to Type or we can just omit it. Step 2: Solve for the YTC with the price of the bond obtained from the 1st step. This is a problem related to semiannual coupon paying bonds. Financial Calculator: N = years to call x 2; PMT = (Annual coupon rate x face value (i.e. par value) of bond)/2; FV = Call price (i.e., value when the bond is called) = Fave Value (i.e. Par Value) + Call Premium = Fave Value (i.e. Par Value) + 4.5% x Fave Value (i.e. Par Value); PV = Price of the bond (a cash outflow) CPT I/Y --> Note the rate here obtained is a 6-month rate, so we have to multiply it by 2. Excel Built-in Rate Function: =RATE(nper, pmt, pv, fv,type,guess) x 2 where nper = years to call x 2; pmt = (Annual coupon rate x face value (i.e. par value) of bond)/2; pv = Price of the bond (a cash outflow); fv = Call price (i.e., value when the bond is called) = Fave Value (i.e. Par Value) + Call Premium = Fave Value (i.e. Par Value) + 4.5% x Fave Value (i.e. Par Value). We can either assign 0 to Type or we can just omit it. We can omit "guess"