Question: please include the call price at issue for Q 1! When Foden Inc. originally issued its callable 6%10-year bond, it was rated AA - and
When Foden Inc. originally issued its callable 6%10-year bond, it was rated AA - and priced to sell at par. The bond is callable at the price that offers an equivalent yield to a Canada bond plus .35\%. At that time, the credit spread over 10 -year Canada bonds was .25%. The bond pays interest annually. 1) What was the call price at issue? ( 2 marks) Now, 6 years later, the bond rating agencies have raised the bond rating to AAA and the bond's yield to maturity is 4.8%. Equivalent-maturity Canada bonds are yielding 4.55%. 2) What is the current call price? ( 2 marks) 3) Would ABC Company consider calling the bond now? (1 mark) When Foden Inc. originally issued its callable 6%10-year bond, it was rated AA - and priced to sell at par. The bond is callable at the price that offers an equivalent yield to a Canada bond plus .35\%. At that time, the credit spread over 10 -year Canada bonds was .25%. The bond pays interest annually. 1) What was the call price at issue? ( 2 marks) Now, 6 years later, the bond rating agencies have raised the bond rating to AAA and the bond's yield to maturity is 4.8%. Equivalent-maturity Canada bonds are yielding 4.55%. 2) What is the current call price? ( 2 marks) 3) Would ABC Company consider calling the bond now? (1 mark)
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