Chevalier Manufacturing issued a callable bond with a 2026 maturity date. The bond was sold at par and the call premium was set equal to the coupon rate of 20%. A declining call premium was also in place so that the premium declined evenly over the last ten years to a premium of zero. What would be the call premium if the bond was called in 2017?
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$ 18 |
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$ 20 |
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$180 |
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$200 |
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cannot calculate without market price |
call premium=1000*20%=200
By 2017, the bond has passed one year of its life, so the premium will reduce by=200/10=20
What would be the call premium if the bond was called in 2017
=call premium-reduce premium for one year
=200-20
=180
the above is answer..
Chevalier Manufacturing issued a callable bond with a 2026 maturity date. The bond was sold at...