Gain or loss on reaquisition of bond

CFA General Calculators
#1

Bond question
Bond question1080×1273 120 KB

Please let me know how to solve the attached question using BA II Plus student version calculator

Thanks

#2

Based on the data provided, face = 500,000 coupon = 8% semi-annual and YTM = 10%. I was annoyed that they didn’t tell you any of this; for YTM, I assumed 23,731/474,622, which by the effective interest method gives YTM = 2 * 4.9999789 = 10%. Judging from the general pattern of the discount amortization, a face = 500,000 seemed reasonable and the carrying amount would hit 500,000 at the end of year 3. Based on this, I assumed a coupon of 40/500 = 8% nominal semi-annual.

#3

Hello,

Thank you so much for giving me some insight into the problem.

Can you please let me know how to arrive at correct answer option among the four answer options given at the end of the question using BA II Plus student calculator ?

Thanks.

#4

An observation: since the bond trades at a premium, the partial call should hit the income statement as a gain.