GHI Co's 15-year bonds currently sell for $1,125 and have a par value of $1,000. The coupon rate is 9.45% and interest payments are made semi-annually. The bonds can be called 5 years after issue at a premium of 5% over par value. Which of the following statements is correct? O The bonds must be called, regardless of the YTM. If the YTM falls below the current level, the bonds are less likely to be called. O If the YTM stays constant, the bonds will not be called. If the YTM rises above the current level, the bonds are more likely to be called. O If the YTM rises above the current level, the bonds are less likely to be called.
GHI Co's 15-year bonds currently sell for $1,125 and have a par value of $1,000. The coupon rate is 9.45% and interest payments are made semi-annually. The bonds can be called 5 years after issue at a premium of 5% over par value. Which of the following statements is correct? O The bonds must be called, regardless of the YTM. If the YTM falls below the current level, the bonds are less likely to be called. O If the YTM stays constant, the bonds will not be called. If the YTM rises above the current level, the bonds are more likely to be called. O If the YTM rises above the current level, the bonds are less likely to be called.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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GHI Co's 15-year bonds currently sell for $1,125 and have a par value of $1,000. The coupon
rate is 9.45% and interest payments are made semi-annually. The bonds can be called 5 years
after issue at a premium of 5% over par value. Which of the following statements is correct?
The bonds must be called, regardless of the YTM.
O If the YTM falls below the current level, the bonds are less likely to be called.
If the YTM stays constant, the bonds will not be called.
If the YTM rises above the current level, the bonds are more likely to be called.
O If the YTM rises above the current level, the bonds are less likely to be called.
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