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Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 3.00% Coupon dates (Annual) Market interest rate today 3.00% Time to call (years)

Bond Features
Maturity (years) 5
Face Value = $1,000
Coupon Rate = 3.00%
Coupon dates (Annual)
Market interest rate today 3.00%
Time to call (years) 3
Price if Called $1,030.00
Market interest rate in Year 3 1.00%

The above bond is callable in 3 years. When the bond is issued today, interest rates are 3.00% . In 3 years, the market interest rate is 1.00% . Should the firm call back the bonds in year 3 and if so, how much would the firm save or lose by calling back the bonds?

A. yes it should call back the bonds, it will save $8.94
B. yes it should call back the bonds, it will save $9.69
C. no it should not call back the bonds, it will lose $9.69
D. no it should not call back the bonds, it will lose $8.94
E. yes it should call back the bonds, it will save $9.41
F. no it should not call back the bonds, it will lose $9.41

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