A 4.5 percent corporate coupon bond is callable in five 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 (4.5% of $1,000 = $45). Therefore, the total call price is $1,000 + $45 = $1,045.

A 45 Percent Corporate Coupon Bond Is Callable in Five Years