Callable Bonds The following bonds have a par value of $1,000 and the required rate of return is 10%. Bond XY: 5 percent coupon, with

Callable Bonds The following bonds have a par value of $1,000 and the required rate of return is 10%.

Bond XY: 5¼ percent coupon, with interest paid annually for 20 years

Bond AB: 14 percent coupon, with interest paid annually for 20 years

What is each bond's current market price?

Bond XY Bond AB Rate

Rate

Nper

PMT

FV

Type

PV =

If current interest rates are 9%, which bond would you expect to be called? Explain.