Call Premium 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 call premium is one year of coupon payments, which is 6% of the par value or $60. Therefore, if the bond is called, the bondholder will receive the par value of $1,000 plus the call premium of $60, for a total payment of $1,060.

Call Premium a 6 Percent Corporate Coupon Bond Is Callable