A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 3 years at 110% of par. What is the bond's yield to call

Bond's yield to call is 8.98%

Explanation:

Currently the price of the bond = $1,000

Let r be the yield to call

Semiannual payment = 3%*1000 = $30

Callable price = 110%*1000 = $1100

Bond is callable in 3 years

1000 = 30 / (1+r/2) + 30 / (1+r/2) ^2 + 30 / (1+r/2) ^3 ... ($1100+$30) (1+r/2) ^6

Solving above gives:

r = 8.98%