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

question 72

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 call of this bond when it is released?

• A) 2.94%
• B) 4.11%
• C) 5.60%
• D) 6.66%

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Definitions:

Subscription Revenue

Income generated from customers who pay a recurring price at regular intervals for access to a product or service.

Interest Accrue

The accumulation of interest expenses or revenues that have been incurred but not yet paid or received in cash.

Note Payment

The process of repaying the principal and/or interest on a promissory note or loan.

IFRS

International Financial Reporting Standards, which are a set of accounting principles used globally to ensure financial reporting consistency and transparency.