Q16-1CP-b.

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Found in: Page 532

### Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

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PV of future payments = $1,405 Call premium = 8% ## Step 2: Comparison of the answer is part a and a bond that has a call premium of 8% The bond is currently trading at$1,405 and this value is \$405 more than the par value of the bond. The bond is paying around 40% more than the par value and this amount is very high as compared to the 8% call premium. The company should call the bonds instead of repurchasing them in the market.

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