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Business, 12.12.2019 03:31 devikapal101

Bond features maturity (years) 5 face value = $1,000coupon rate = 5.00%coupon dates (annual) market interest rate today 5.00%time to call (years) 3 price if called $1,050.00market interest rate in year 3 is 2.00% the above bond is callable in 3 years. when the bond is issued today, interest rates are 5.00% . in 3 years, the market interest rate is 2.00% . should the firm call back the bonds in year 3 and if so, how much would the firm save or lose by calling back the bonds? a. yes it should call back the bonds, it will save $8.25b. yes it should call back the bonds, it will save $7.83c. no it should not call back the bonds, it will lose $7.83d. yes it should call back the bonds, it will save $8.49e. no it should not call back the bonds, it will lose $8.25f. no it should not call back the bonds, it will lose $8.49

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Bond features maturity (years) 5 face value = $1,000coupon rate = 5.00%coupon dates (annual) market...
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