A Bond Is Callable in 2 Years and Currently Has

question 19

Multiple Choice

A bond is callable in 2 years and currently has a yield to call of 4.8 percent. The bond has a coupon rate of 5 percent and pays interest semi-annually. The call premium is $50 and the face value is $1,000. What is the current price?

• A) $904.16
• B) $989.14
• C) $998.12
• D) $1,003.77
• E) $1,049.25

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Definitions:

Mark-Up

The amount added to the cost price of goods to cover overhead and profit; it is the difference between the cost of a good or service and its selling price.

Market Power

The ability of a company or entity to influence the price and output levels in a market.

Elasticity Of Demand

A measure of how much the quantity demanded of a good changes in response to a change in its price.

Mark-Up

A percentage added to the cost price to determine the selling price.