You bought a $1,000 par IBM callable bond in September 2019 that is callable at 103...

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You bought a $1,000 par IBM callable bond in September 2019 that is callable at 103...

You bought a $1,000 par IBM callable bond in September 2019 that is callable at 103 in 2023, 102 in 2024, 101 in 2025 and at par thereafter. It has a coupon rate of 3.0%/year. Excluding interest, how much would you receive if IBM called the bond in:

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Answer 1

Answer #1

In 2023: Callable amount = 103%*1000 = 1030

In 2024: Callable amount = 102%*1000 = 1020

In 2025 and thereafter: Callable amount = 100%*1000 = 1000

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Answer 2

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