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Nazareth Lacayo
on Dec 09, 2024

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The bonds offered by Glenwood Studios are callable in 4 years at a quoted price of 106. What is the amount of the call premium on a $1,000 par value bond?

A) $30
B) $40
C) $50
D) $60
E) $70

Callable Bonds

Bonds that can be redeemed by the issuer prior to their maturity date, often at a premium price.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is often a nominal amount.

Call Premium

The extra amount over the par value that a buyer must pay to purchase a call option, which gives the right, but not the obligation, to buy an asset at a specified price.

  • Understand the implications of callable bonds and their pricing.
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helina MarkosDec 10, 2024
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