Question of the Week

A 10-year, 8% coupon bond is currently trading at 98.5 of par. This bond is callable in 5-years at a price of 101.5. However, it also has a putable feature which comes into effect in 4 years at a strike price of 97.5. What is this bond's current yield measure?

a) 8.12%
b) 8.00%
c) 7.81%
d) 8.22%


Answer:

The correct answer is: a)

2005 LOS: 16.1.B.b