A $1000 Bond Has Semi-Annual Coupons at J₂= 10

A $1000 bond has semi-annual coupons at j₂= 10%.It is redeemable at par in n-years (n > 5) .The bond is callable in 5 years at par.The price of the bond to yield j₂ = 8%,assuming the bond is held to maturity,is $1172.92.Which of the following is the correct answer?

A) Investor would not be willing to pay $1172.92 because if the bond is called in 5 years,they will earn less than j₂ = 8%.
B) Investor would not be willing to pay $1172.92 because if the bond is held to maturity,they will earn less than j₂ = 8%.
C) Investor would be willing to pay $1172.92 because if the bond is called in 5 years,they will earn exactly j₂ = 8%.
D) Investor would be willing to pay $1172.92 because if the bond is called in 5 years,they will earn more than j₂ = 8%.

Correct Answer:

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