Will Owns a Bond with a Make-Whole Call Provision

question 87

Multiple Choice

Will owns a bond with a make-whole call provision. The bond matures in 13 years but is being called today. The coupon rate is 8.25% with interest paid semiannually. What is the current call price if the applicable discount rate is 7.75% and the make-whole call provision applies?

• A)$932.84
• B)$957.11
• C)$1,040.51
• D)$1,110.28
• E)$1,128.66

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Definitions:

Labor Shortage

A situation in which employers have difficulty filling vacancies because there are not enough available workers with the necessary skills.

Unemployment

The situation where individuals who are capable of working and are actively seeking employment are unable to find a job.

Binding Price Ceiling

A government-imposed maximum price on goods or services that is set below the market equilibrium price, leading to shortages.

Binding Price Floor

A government-imposed price control that sets a minimum price for a good or service above the equilibrium price, leading to excess supply.