Call Premium A 6 percent corporate coupon bond is callable in ten 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 call premium is one year of coupon payments, which is 6% of $1,000, or $60. Therefore, the price paid to the bondholder if the issuer calls the bond is the par value plus the call premium: $1,000 + $60 = $1,060.

Call Premium a 6 Percent Corporate Coupon Bond Is Callable