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:

Nonsense Syllable

A string of letters that does not form a meaningful word, often used in memory and learning experiments.

Working Memory

The segment of short-term memory tasked with the immediate conscious processing of perceptions and language.

Rehearsal

A cognitive process involving the repeated review or practice of information to aid in its retention and recall.

Spacing Effect

The tendency for distributed study or practice to yield better long-term retention than is achieved through massed study or practice.