Can anyone figure out the above bond math? The author of the book didn't outline any assumptions but I'm having trouble understanding why a bond trading at 101 would have a yield greater than the 10% coupon. The call premium might have something to do with the yield calculation but I would love to know how the yields in these two tables are being calculated or what assumption I'm missing since I thought yield was just annual interest / market price.
| +159 | How to stop feeling like shit for not making it in IB? | 58 | 36m | |
| +117 | If Tik Tok is forced to sell, what banks do you think would be involved in the deal? | 59 | 1s | |
| +83 | Updated LA Banking Scene (2024) | 60 | 55m | |
| +39 | Ranking banks that went under | 22 | 2s | |
| +37 | Burnt Out M&A ASO | 19 | 2s | |
| +35 | Relevance of A-Levels for U.K. London recruiting | 24 | 1h | |
| +32 | A strategy for SA applicants late to the game like myself | 15 | 22h | |
| +27 | Series 79 Help / Tips to Pass The First Attempt | 11 | 2d | |
| +26 | Intern Ettiquette | 4 | 1d | |
| +23 | What are hours like at BBs in London? | 47 | 23h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Did you work out any math around the call price? The bond's current trading price is 101 and call price is 105.
Did some digging myself. Here are the assumptions to get a yield of 11.05%.
Years to maturity = 5 (but doesn't really matter with a call) Years to call = 3 Par value = 1000 Bond Price = 1010 Call Price = 1050 Coupon Rate = 0.10 > 10%
Always assume bonds compound semiannually unless otherwise stated.
Plug those numbers in and you will see the yield to call is 11.05.
Try plugging in other combinations and see how it flows.
Sunt architecto sed id officia omnis enim minima. Esse velit molestiae quam.
Fugit et molestiae voluptas aut hic voluptas repudiandae. Dolores libero consequatur laborum fugiat nobis. In sint fugit ut qui cum nostrum libero.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...