Question
A company issues a callable 10-year, 4% coupon bond with annual coupon payments. The bond can be called at $95 in 4 year after release.
A company issues a callable 10-year, 4% coupon bond with annual coupon payments. The bond can be called at $95 in 4 year after release. On release, it has a price of $90 per $100 of face value. What is the yield to call of this bond when it is released?
A. 5.42%
B. 5.31%
C. 5.72%
D. 6.95%
Answer D is incorrect. which one is correct and why?
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Managerial Finance Essentials
Authors: Charles O. Kroncke, Alan E. Grunewald, Erwin Esser Nemmers
2nd Edition
0829901590, 978-0829901597
