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A Firm Is Planning to Issue a Callable Bond with a Coupon

Question 102

Multiple Choice

A firm is planning to issue a callable bond with a coupon rate of 8% and 10 years to maturity. A straight bond with a similar coupon is priced at $1,000. If the value of the issuer's call option is estimated to be $60, what is the value of the callable bond?


A) $940
B) $970
C) $1,000
D) $1,060

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