Abby Owns a $1000 Callable Bond That Was Issued in 2002

question 32

Multiple Choice

Abby owns a $1000 callable bond that was issued in 2002 and matures in 2032.The bond was issued with a coupon rate of 8.5%.Interest rates have been falling since the bonds were issued,and coupon rates on similar newly issued bonds are now 5.5%.Under these circumstances,what will be the likely result?

• A)Abby is likely to be very unhappy with the return the bond is paying each year.
• B)Abby will receive $55 in interest this year.
• C)Abby will exchange the bonds for a stated number of shares of stock in the same company.
• D)The firm that issued the bond is very likely to redeem it in the near future.

---

Definitions:

Provincial Law Society

An organization in each Canadian province responsible for regulating the legal profession in the public interest.

Hearing

A proceeding before a court or other decision-making body where evidence is presented and arguments are made to determine an issue.

Misconduct

Improper or unacceptable behavior or actions, especially by a professional or official, that breaches duty or violates guidelines.

Professional Conduct

The set of rules, ethics, and standards that govern how professionals should behave in their professional lives.