Abby Owns a $1000 Callable Bond That Was Issued in 2002

Multiple Choice

Abby owns a $1000 callable bond that was issued in 2002 and matures in 2032.The bond was issued with a coupon rate of 8.5%.Interest rates have been falling since the bonds were issued,and coupon rates on similar newly issued bonds are now 5.5%.Under these circumstances,what will be the likely result?

A) Abby is likely to be very unhappy with the return the bond is paying each year.
B) Abby will receive $55 in interest this year.
C) Abby will exchange the bonds for a stated number of shares of stock in the same company.
D) The firm that issued the bond is very likely to redeem it in the near future.