A Company Issues a Callable (At Par) Five-Year, 7% Coupon

A company issues a callable (at par) five-year, 7% 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 $110 per $100 of face value. What is the yield to call of this bond when it is released?

A) 1.40%
B) 2.73%
C) 4.71%
D) 5.66%

Correct Answer:

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