Question: Question: Based on teh scenario below, Mr. Johnson expressed some concerns regarding the call provision embedded in the bonds issued by Companies A and B.

Question: Based on teh scenario below, Mr. Johnson expressed some concerns regarding the call provision embedded in the bonds issued by Companies A and B. He was uncertain about its potential effects on the returns and the risk of the bonds. Can you provide Mr. Johnson with both qualitative and quantitative detailed explanations? Support your answers, conclusions, and recommendations with calculations and relevant financial concepts.

Scenario: You are a financial advisor working for a prestigious investment firm. You are meeting with a high-net-worth client, Mr. Johnson, to discuss investment strategies that align with his financial objectives. One specific aspect of Mr. Johnsons financial objectives is to include fixed income securities in his invesetment portfolio, and he is particularly interested in three corporate bonds issued by different companies:

A. Company A bond with 10-year maturity and 8% annual coupon rate is currently selling for $1,200. The bond is callable after 5 years at $1,050.

B. Company B bond with 12-year maturity and 5% annual coupon rate is currently selling for $1,100. The bond is callable after 4 years at $1,030.

C. Company C bond with 15-year maturity and 4% annual coupon rate is currently selling for $950. The bond is non-callable.

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