A Company Issues a 10-Year, Callable Bond at Par with 8

question 55

Multiple Choice

A company issues a 10-year, callable bond at par with 8% annual coupon payments. The bond can be called at par in one year after issue or any time after that on a coupon payment date. The call price is $104 per $100 of face value. What is the yield to call if this bond is called in one year?

• A) 7%
• B) 12%
• C) 10%
• D) 4%

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Definitions:

Relative Value

The worth or importance of something in relation to another item's worth, often used in economics and investing.

Source Factors

Characteristics of the communicator or source of information that affect the persuasiveness or effectiveness of the communication.

Mechanic

A skilled worker who repairs and maintains machinery, vehicles, or other mechanical equipment.

Drunk Driving

The act of operating a motor vehicle while under the influence of alcohol, which impairs cognitive and motor skills.