Asked by
Carlton LaFrance
on Dec 08, 2024
Verified
A 12% coupon bond with semi-annual payments is callable in five years. The call price is $1,120. If the bond is selling today for $1,110, what is the yield to call?
A) 12.03%
B) 10.86%
C) 10.95%
D) 9.14%
E) None of the options are correct.
Callable
Refers to a type of financial security, such as a bond, that can be redeemed or "called" by the issuer before its maturity date, usually at a specified call price.
Yield To Call
The rate of return anticipated on a bond if it is held until the call date, considering both the interest payments received and the capital gain or loss upon redemption.
Call Price
The price at which a callable bond or preferred stock can be repurchased by the issuer before its maturity date.
- Determine the features and evaluation of distinct bond types including coupon, zero-coupon, callable, and convertible bonds.
Verified Answer
ML
Learning Objectives
- Determine the features and evaluation of distinct bond types including coupon, zero-coupon, callable, and convertible bonds.