Question
You are considering investing in several comparable 10-year 5% semi annual coupon bonds priced. The make whole call provisions of the bonds are listed below.
You are considering investing in several comparable 10-year 5% semi annual coupon bonds priced. The make whole call provisions of the bonds are listed below. Assuming all 5 bonds are using the same benchmark treasury bond, select which make whole call provision terms below provide for the lowest call risk.
- Make whole at 15bps until maturity, bond currently trading at 100bp spread over benchmark.
- Make whole at 20bps until maturity, bond currently trading at 100bp spread over benchmark.
- Make whole at 15bps until maturity, bond currently trading at 200bp spread over benchmark.
- Make whole at 20bps until maturity, bond currently trading at 200bp spread over benchmark.
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Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
