Blue Water Homes Has 8% Bonds Outstanding That Mature in 13

question 37

Multiple Choice

Blue Water Homes has 8% bonds outstanding that mature in 13 years. The bonds pay interest semiannually. These bonds have a par value of $1,000 and are callable in 2 years at a premium of $75. What is the yield to call if the current price is equal to 103.25% of par?

• A)7.51%
• B)7.70%
• C)8.06%
• D)8.98%
• E)9.66%

---

Definitions:

Big XII Championship

An annual championship game determining the conference champion of the Big XII Conference, primarily in American college football.

U.S. Treasury Bills

Short-term government securities issued by the United States Department of the Treasury with maturity periods ranging from a few days to 52 weeks.

Common Stocks

Shares of ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends or stock appreciation.

Riskless Assets

Financial instruments that are considered to have a minimal possibility of default, often yielding a guaranteed, but lower, return.