A Company Issues a Callable (At Par) Ten-Year, 6% Coupon

question 20

Multiple Choice

A company issues a callable (at par) ten-year, 6% 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 $104 per $100 of face value. What is the yield to call of this bond when it is released?

• A) 0.60%
• B) 1.50%
• C) 1.92%
• D) 5.47%

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Definitions:

FUTA Tax

The Federal Unemployment Tax Act (FUTA) tax is a payroll tax paid by employers to help fund state workforce agencies.

SUTA Tax

State Unemployment Tax Act tax, a payroll tax that employers pay to fund their state's unemployment insurance.

Sales Taxes Payable

The liability account used to record the sales tax collected from customers by a seller, which is due to be paid to the government.

Cash Sales

Transactions in which goods or services are paid for and received at the time of the sale, using cash or equivalent.