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What are the pros and cons of calling the bond

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Reference no: EM132410213

Question

The bond is expected to be a 5-year, $100,000 face value, 6% bond with an effective annual yield of 5%. Interest will be payable semiannually. If all goes well, the bond will be issued on March 1, 2020, and the first interest payment date will be September 1, 2020. The bonds are expected to be callable at 102 at any time on or after March 1, 2022.

Amortize the bond using the effective-interest method.

1.) What are the pros and cons of calling the bond before maturity? What are some things to consider?

2.) Include an amortization schedule using the effective interest method as an exhibit to follow your memo (you do not need to consider prorations).

Reference no: EM132410213

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