To calculate the CY and YTC, we first need to calculate the present value of the bond: FV = 1,000; N = 5 × 2 = 10; PMT = (1000 × 0.0875) / 2 = 43.75; I/Y = (9.25 / 2) = 4.625; CPT → PV = -980.34 (negative sign because we entered the FV and payment as positive numbers). Then, CY = (Face value × Coupon) / PV of bond = (1,000 × 0.0875) / 980.34 =
8.93%.
And the YTC calculation is: FV = 1,025 (price at first call); N = (2 × 2) = 4; PMT = 43.75 (same as above); PV = –980.34 (negative sign because we entered the FV and payment as positive numbers); CPT → I/Y = 5.5117 (semi-annual rate, need to multiply by 2) = 11.02%.
