A Company Issues a Callable (At Par) 20-Year, 5% Coupon

question 17

Multiple Choice

A company issues a callable (at par) 20-year, 5% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $102 per $100 of face value. What is the yield to worst of this bond when it is released?

• A) 2.94%
• B) 4.84%
• C) 5.60%
• D) 6.66%

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Definitions:

Breach

The act of infringing upon or failing to comply with a law, obligation, or any type of agreement.

Personal Assistant

An individual employed to help with daily tasks and organization, often for a business professional or executive.

Estate

The total assets owned by an individual at the time of their death, including real property, personal property, and financial assets.

Obligation

A legal or moral duty to perform or refrain from performing some action.