A 6 percent corporate coupon bond is callable in 10 years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?

Question

Quizplus · Accepted Answer

The price paid to the bondholder if the issuer calls the bond would be the par value ($1,000) plus the call premium, which is one year of coupon payments (6% of $1,000 = $60). Therefore, the total amount paid would be $1,000 + $60 = $1,060.

A 6 Percent Corporate Coupon Bond Is Callable in 10