Ted Owns a Bond Which Is Callable in 2

question 21

Multiple Choice

Ted owns a bond which is callable in 2.5 years.The bond has a 6 percent coupon,pays interest semiannually,has a par value of $1,000,and has a yield to call of 6.3 percent.What is the call premium if the bond currently sells for $1,044.54?

• A) $50
• B) $60
• C) $70
• D) $75
• E) $80

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Definitions:

Standard Deviations

A measure of the amount of variation or dispersion in a set of values, indicating how spread out the values are from the mean.

Mean

In statistics, it refers to the average value in a set of numbers, calculated by dividing the sum of all values by the number of values.

Scatterplot

A graphical representation displaying the relationship between two quantitative variables.

Correlated

A term indicating a statistically significant relationship between two or more variables, implying that changes in one are associated with changes in the other.