Chapter 15, Problem 11P

Summary Introduction

Callable bonds:

Callable bonds are those bonds which give issuers right to redeem the bonds prior to the maturity. Callable bonds are also called redeemable bonds.

Call provision:

The call provision allows the issuer of the bonds to repurchase the bonds at a predetermined price prior to the maturity. A call provision gives right to retire all outstanding bonds on a specific date known as the call date, for the call price that is specific to the issuance of the bond.

(a)

To determine:

Bond’s Yield to maturity.

Summary Introduction

(b)

To determine:

Yield to call.

Summary Introduction

(c)

To determine:

Yield to worst.