1- Florida bank is planning to issue 20-year non-callable bonds. The CEO of FloridaBank suggests to change it to callable at year 5 with 5% call premium. Which of the following statement is most likely correct?

a.		There is no reason to expect a change in the required rate of return.
b.		The required rate of return would increase because the bond would then be more risky to a bondholder.
c.		The required rate of return would increase because the bond would then be more risky to a bond issuer.
d.		None of the above.

2- Florida Bank issued 7.75% annual coupon bonds three years ago. Today, the market interest rate on these bonds is 5.25%. What is the approximate price of the bonds today (fair value)?

a.		$100
b.		$117.57
c.		$89.23
d.		None of the above.