Consider a 15-year 8% semiannual callable bond with

par value $1,000. It carries a

make-whole call provision. The yield of the bond is

4.25% when it is called in year 7.

The make-whole rate is the yield of the comparable

10-year Treasury note plus 35 basis

points. On the call date, the yield spread between

the callable bond and the 10-year T-

note is 52 basis points.

(1) What is the make-whole price of the bond? (3 po

ints)

(2) What is the make-whole dollar premium if the pr

ice of the callable bond on the call

date is $1,025?