Orange District Hospital issued a 30-year, 10 percent annual coupon bond ($1,000 face value) two years ago. The bond has 28 years left until maturity and is sold for $1,400. The bond has a call provision that allows the hospital to collect the bond in ten years at a purchase price of $1,100. If an investor expects a call option and requires a rate of return of 6.5 percent, Is he or she likely to buy the bond? Explain your answer

Answer rating: 100% (QA)

Will the investor buy the Orange District Hospital bond No the investor is unlikely to buy the bond ... View the full answer