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Basic Question 7 of 16
A 30-year, semi-annual pay, 5% coupon bond is priced at par. The bond is callable beginning with the first coupon payment date 15 years from the present date. In the absence of default by the bond issuer:
B. holders of this bond may receive as many as 60 or as few as 29 cash flows
C. holders of this bond may convert their bond holdings into common stock of the issuer
A. holders of this bond may receive coupon interest as high as 5% per annum or as low as 2.5% per annum
B. holders of this bond may receive as many as 60 or as few as 29 cash flows
C. holders of this bond may convert their bond holdings into common stock of the issuer
User Contributed Comments 4
| User | Comment |
|---|---|
| 2014 | Good question |
| ibrahim18 | Easy pizzy |
| CJHughes | If it gets called on first coupon date, it pays the semi-annual rate of 2.5%. So, bond holders "may receive coupon interest as high as 5% per annum or as low as 2.5% per annum". Technically I feel 'A' is correct, as investors may receive only 2.5% per annum if it happens to get called that year. |
| go_mez | Agree with A, the present date doesn’t specify that you are stand at the begining. |
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Learning Outcome Statements
describe fixed-income securities with embedded options;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.