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A $1000 bond is redeemable at par in 20 years. The bond is callable at the end of 10 years at 1100. The price of
A $1000 bond is redeemable at par in 20 years. The bond is callable at the end of 10 years at 1100. The price of the bond to yield j2 = 5% is
$1125.51 assuming the bond is held to maturity $1138.97 assuming the bond is called at 10 years Which of the following statements is true?
(I) If you pay $1125.51 and bond is called after 10 years, the yield will exceed j2 = 5%
(II) If you pay $1138.97 and bond is called after 10 years, the yield will be less than j2 = 5%
A. (I) only
B. (II) only
C. Both (I) and (II)
D. Neither (I) or (II)
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