24. A large corporation issued both fixed and floating-rate notes 5 years ago, with terms given in the following table:

9% Coupon Notes Floating-Rate Note Issue size $250 million $280 million Original maturity 20 years 10 years Current price (% of par) 93 98 Current coupon 9% 8%

Coupon adjusts Fixed coupon Every year Coupon reset rule — 1-year T-bill rate  2%

Callable 10 years after issue 10 years after issue Call price 106 102.50 Sinking fund None None Yield to maturity 9.9% —

Price range since issued $85–$112 $97–$102

a. Why is the price range greater for the 9% coupon bond than the floating-rate note?

b. What factors could explain why the floating-rate note is not always sold at par value?

c. Why is the call price for the floating-rate note not of great importance to investors?

d. Is the probability of call for the fixed-rate note high or low?

e. If the firm were to issue a fixed-rate note with a 15-year maturity, what coupon rate would it need to offer to issue the bond at par value?

f. Why is an entry for yield to maturity for the floating-rate note not appropriate?