When ABC Company originally issued its callable 5.5%, 10-year bond, it was rated AA and...
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When ABC Company originally issued its callable 5.5%, 10-year bond, it was rated AA and priced to sell at par. The bond is callable at the price that offers an equivalent yield to a Canada bond plus .15%. At that time, the credit spread over 10-year Canada bonds was .25%. The bond pays interest annually.
What was the call price at issue?
Now, 5 years later, the bond rating agencies have raised the bond rating to AAA and the bonds yield to maturity is 5%. Equivalent-maturity Canada bonds are yielding 4.9%.
What is the current call price?
Would ABC Company consider calling the bond now?
*Please respond without the use of excel
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