A Company Issues a Callable (At Par) 20-Year, 5% Coupon

A company issues a callable (at par) 20-year, 5% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $102 per $100 of face value. What is the yield to call of this bond when it is released?

A) 2.94%
B) 4.11%
C) 5.60%
D) 6.66%

Correct Answer:

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