A Callable Bond with a Make Whole Provision Has a Par

question 48

Multiple Choice

A callable bond with a make whole provision has a par value of $1,000. It has a coupon of 5%, a yield to maturity of 5.5% and matures in 5 years. If a comparable Canadian treasury note has a yield of 4.25% and the make-whole call provision provides for a 30 basis point call premium above the comparable treasury note, what is this bond's make whole call price? Assume semi-annual payments.

• A) $978.40
• B) $980.30
• C) $986.71
• D) $1,019.92
• E) $1,033.47

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