Ferris Metals Has Bonds Outstanding, Which It Is Calling Today

question 39

Multiple Choice

Ferris Metals has bonds outstanding, which it is calling today under the make-whole call provision. The bonds mature in 7 years, have a 9% coupon, pay interest semiannually, and have a par value of $1,000. What is today's call price given that the applicable discount rate is 7.05%?

• A)$879.12
• B)$968.35
• C)$1,015.55
• D)$1,106.30
• E)$1,172.71

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Definitions:

Initial Project Expenditures

The initial costs incurred when starting a project, often including materials, labor, and other expenses.

Worst-case Scenario

The most adverse, negative outcome that could possibly occur in a situation, often used in risk assessment and planning.

Variable Costs

Costs that change in proportion to the level of production or sales. They increase as production increases and decrease as production decreases.

Fixed Costs

Costs that remain constant regardless of the amount of production or business operations.