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Hoppy Beer Company issues new 5-year, $1000 face-value bonds today. The bonds have a stated coupon rate of 6.2% paid annually. The selling price of
Hoppy Beer Company issues new 5-year, $1000 face-value bonds today. The bonds have a stated coupon rate of 6.2% paid annually. The selling price of the bonds is $982. Ceteris paribus, would investors demand a higher or lower yield on the Hoppy Beer bonds if they were callable if the only difference was the call provision? Explain your answer in one or two sentences referring to the notion of embedded options.
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