Question: LO3 Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 5.00% Coupon dates (Annual) Market interest rate today 5.00% Time to call

LO3

Bond Features

Maturity (years)	5
Face Value =	$1,000
Coupon Rate =	5.00%
Coupon dates (Annual)
Market interest rate today	5.00%
Time to call (years)	3
Price if Called	$1,050.00

Market interest rate in Year 3	4.00%

The above bond is callable in 3 years. When the bond is issued today, interest rates are 5.00% . In 3 years, the market interest rate is 4.00% . Should the firm call back the bonds in year 3 and if so, how much would the firm save or lose by calling back the bonds?

Group of answer choices

yes it should call back the bonds, it will save $29.58

no it should not call back the bonds, it will lose $31.14

no it should not call back the bonds, it will lose $29.58

yes it should call back the bonds, it will save $32.07

yes it should call back the bonds, it will save $31.14

no it should not call back the bonds, it will lose $32.07

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