medium · Debt Capital Markets pricing-yields-curve
An issuer has outstanding bonds with a make-whole call provision. The make-whole price is defined as the present value of remaining cash flows discounted at the Treasury yield plus 15 bps.
If the bond's current market credit spread is 120 bps, what is the likely status of the call?
- The call is economically 'in-the-money' for the issuer.
- The bond will likely be called immediately to save on interest costs.
- The investor will likely exercise their right to put the bond back to the issuer.
- The make-whole price will be significantly above the market price, making a call uneconomic.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets pricing-yields-curve practice
- For a bond trading at a discount (below par), which yield measure is typically the same as
- If a bond's Yield to Worst is equal to its Yield to Maturity, what can we likely conclude
- If an issuer decides *not* to call a bond on the first call date even though it is economi
- If a bond's YTW is significantly lower than its YTM, the bond is likely trading at a:
- For a bond with several call dates at different prices, the Yield to Worst is:
- The concept of 'Pull to Par' describes the price convergence… — Which yield measure inhere
- If an investor buys a bond with a 5% coupon at a price of 102, how does the Yield to Matur
- A bond's yield to maturity (YTM) is 7%, but its current yiel… — What does this suggest abo