Question

Consider the below for Kenny's Sport's Stores bonds that make semi-annual coupon payments:

Current Price = $1,280

Face Value = $1000

Coupon = 13.5%, paid semi-annually

Maturity = 15 years

Callable in 5-years at $1050

1. What is the yield to call on Kenny's bonds?

2. If in 5 years Kenny's bonds are trading at a price of $1,200, is it likely Kenny will call the bonds (all else remaining the same)?   

Pick 1

6.80% : No

7.52%: Yes

3.40% : Yes

7.52% : No

6.80%: Yes

3.40% : No

Answer 1