8.4 Assume the yield curve on "plain vanilla" default-tree bonds is at at 5%, and you are thinking of buying a default-free bond. Specifically, you're thinking of buying a bond issued by Risklessco. a company considered to be default-free by all major bond rating rms. You will select one of the following three bonds, all identical except for the special features listed: Face Maturity Coupon Yield to Special Features Price Value Rate (Paid Maturity Annually) A 1000 20 years 5.5% 5% None ? B 1000 20 years 5.5% 5% Gallable Par C 1000 20 years 5.5% 3.5% |Gallable and ? Convertible into Ftisldessco Stock A. Why is the yield on bonds A and B 5%? Why is the yield on bond 0 ditlerent? B. What would be the price of Bond A? C. It bond G is considered identical to bond B except for the conversion privilege. Mat is the value of the conversion privilege? Does the conversion privilege benefit the issuer o! the bond or the purchaser? Is this consistent with the price you calculated for bond C? D. Who does the callability provision benefit. the issuer or the purchaser? Is this consistent with the price you calculated tor bond A