Ferrous Metals Has Bonds Outstanding Which It Is Calling Today

question 14

Multiple Choice

Ferrous Metals has bonds outstanding which it is calling today under the make-whole call provision.The bonds mature in 6 years,have a 10 percent 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 7.20 percent?

• A)$879.12
• B)$968.35
• C)$1,015.55
• D)$1,134.49
• E)$1,172.71

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Definitions:

Futures Contract

A standardized legal agreement to buy or sell something at a predetermined future date and price, commonly used for commodities or financial instruments.

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A political event held in various countries where citizens vote to elect the President, the head of the executive branch of government.

Interest Rate Futures

Financial derivatives contracts that lock in the future delivery of an asset with an interest-bearing instrument at a specified price.