Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% and compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and current yield to maturity is 7%. What is the value of callable bond?

Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% and compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and current yield to maturity is 7%. What is the value of callable bond?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 7PROB

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Question

Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% and
compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and current
yield to maturity is 7%. What is the value of callable bond?
O $1,117
O $1,240
O $1,120
O $854

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