An 8% Coupon Municipal Bond Has 15 Years Left to Maturity

An 8% coupon municipal bond has 15 years left to maturity and has a price quote of 98.5. The bond can be called in 6 years. The call premium is one year of coupon payments. Compute the bond's yield to call and determine if the bond will be called. Assume interest payments are paid semi-annually and a par value of $5,000.

A) 4.68%; yes, the bond will be called
B) 9.36%; yes, the bond will be called
C) 9.36%; no, the bond will not be called
D) 10.71%; no, the bond will not be called

Correct Answer:

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