When it comes to investments, a government is no different than a business organization. Governments typically finance its project(s) via bonds. Once a bond is issued, it might be prudent for a government to recall the bond depending on the interest rate and potential benefit. 

In a bond refunding, if NYS issues a 10 years bond previously for $1,000 face value, semi-interest rate of 8% percent annually. Assuming rates fell to 6%: 

Present Value @ 3% of a single sum of $1 = 0.553368  and Annuity of $1 = 14.87747.

Which statement holds true?

		It is difficult to calculate the impact, given the limited information.
		Since the new rate is lower, it will yield lower period bond interest and therefore result in gains.
		Costs of old issue must be more than the new issue.
		The cost of the new issue is > $1,148.78

Answer rating: 100% (QA)

ANSWER C Costs of the old issue must be more than the new issue Bond refunding is a corporate action ... View the full answer