A Bond Has a Face Value of $1,000 and a Call

question 6

Multiple Choice

A bond has a face value of $1,000 and a call price of $1,035. The bond is callable in 3 years and pays a 4.5%, semiannual coupon. What is the current price if the yield to call is 5%?

• A)$1,000
• B)$1,016.14
• C)$1045.39
• D)$1060.92
• E)$1,101.39

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Definitions:

Determination

The measure of how well a set of data points fit a statistical model.

SSR

Sum of Squares for Regression, a statistical measure that showcases how well a regression model captures the explained variance in the data.

SSE

Stands for Sum of Squares due to Error, representing a measure of the discrepancy between the data and an estimation model.

Degrees Of Freedom

A concept used in statistical analysis, indicating the number of independent values or quantities that can vary within an analysis without breaking any constraints.