Hot Foods has an investment-grade bond issue outstanding that pays $30 semiannual interest payments. The bonds sell at par and are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus .50 percent. Which one of the following correctly describes this bond?

Question

Quizplus · Accepted Answer

The bond is callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus .50 percent, which is a "make whole" call price. The bond's rating and coupon rate are not given, and it sells at par, so its market value is equal to its face value. The interest payments are fixed at $30 semiannually.

Hot Foods Has an Investment-Grade Bond Issue Outstanding That Pays