The bonds offered by Leo's Pumps are callable in 3 years at a quoted price of 101. What is the amount of the call premium on a $1,000 par value bond?

A) $3.33
B) $5.00
C) $10.00
D) $13.33
E) $100.00

Question

The bonds offered by Leo's Pumps are callable in 3 years at a quoted price of 101. What is the amount of the call premium on a $1,000 par value bond?A)  $3.33B)  $5.00C)  $10.00D)  $13.33E)  $100.00

Connor McGee · Accepted Answer

Final Answer : C, Explanation :  The call premium is the amount above the par value that the issuer must pay to call the bond. Since the bond is callable at 101, this means it can be called at 101% of its par value. For a $1,000 par value bond, 101% is $1,010. The call premium is therefore $1,010 - $1,000 = $10.

The bonds offered by Leo's Pumps are callable in 3 years at a quoted price of 101. What is the amount of the call premium on a $1,000 par value bond?

A) $3.33
B) $5.00
C) $10.00
D) $13.33
E) $100.00

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