Answer:
5.28%
Explanation:
For determining the nominal yield to call, first we have to find out the present value which is shown below:
Given that,
Future value = $1,000
Rate of interest = 6.50% ÷ 2 = 3.25%
NPER = 15 years × 2 = 30 years
PMT = $1,000 × 8.75% ÷ 2 = $43.75
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $1,213.55
Now the nominal yield to call is come after applying the RATE formula which is shown below:
Given that,
Present value = $1,213.55
Future value or Face value = $1,050
PMT = 1,000 × 8.75% ÷ 2 = $43.75
NPER = 6 years × 2 = 12 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the yield to call is
= 2.64% × 2
= 5.28%
