The bond that has the highest call risk based on the groups is A bond priced at 90 with 8 years to maturity.
<h3>What is the call risk of a bond?</h3>
This is the risk that a person that issues bonds would have to redeem the bond before it gets to its maturity. The bond would be a callable bond.
The holder of the bond is going to get value based on the price of this bond.
<h3>Complete question</h3>
The five 10-year semi-annual coupon bonds listed below are of comparable risk and have the same call provision: 5 years of call protection (NC-5), after which bonds are callable at 105% of par in the 6th year and declining ratably thereafter (103.75, 102.5, 101.25 and par in years 7, 8, 9, and 10, respectively). Which of these bonds appears to face the highest call risk?
A bond priced at 90 with 2 years to maturity
A bond priced at 90 with 8 years to maturity
A bond priced at 105 with 4 years to maturity
A bond priced at 115 with 2 years to maturity
A bond priced at 120 with 2 years to maturity
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