Question

A corporate coupon bond of 6.2 percent is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?

Answer 1

Price paid to bondholders if issuer calls the bond					=	Par Value of Bond + One year coupon interest
					=	$ 1,000.00	+	$    62.00
					=	$ 1,062.00
Working;
One coupon interest			=	Par Value * Coupon rate
			=	1000*6.2%
			=	$    62.00