Rearden Metal Has Just Issued a Callable,$1000 Par Value,twenty-Year,8% Coupon

question 30

Multiple Choice

Rearden Metal has just issued a callable,$1000 par value,twenty-year,8% coupon bond with semiannual coupon payments.The bond can be called at par in five years or anytime thereafter on a coupon payment date.If the bond is currently trading for $1040.79,then its yield to call is closest to:

• A)3.8%.
• B)7.0%.
• C)7.6%.
• D)8.0%.

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Definitions:

Face Value

The nominal or dollar value printed on a security or instrument, such as a bond or stock, representing its legal value.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the loan or deposit amount.

Unrealized Holding Gain

The increase in value of an asset that is still held by an entity and has not been sold for a profit.

Trading Security

A financial asset that a company holds primarily for the purpose of selling it in the short term to profit from price changes.