Dear Mr Moffat,
First, thank you for your help. I appreciate that you are helping us even on a Sunday.
Would you mind explaining how the 4% redemption yield has been calculated with the following information:
Issue 6% redeemable bonds quoted at 120% ex int.
I can't see how to calculate the IRR without the redemption date?
Thank you.
Catherine
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Redemption Yield
11y ago#1The question you refer to does not require you to calculate the redemption yield (you cannot be asked to calculate it in F9).
You can calculate the interest yield (6/120 = 5%).
Since the market value is 120 (and the question says they will be redeemed at a lower value) the redemption yield must be lower than 5%.
Only one of the four choices has an interest yield of 5% and a redemption yield that is lower.
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