The price paid to the bondholder would be equal to $1065 if the issuer calls the bond.
<h3>What do you mean by bond premium?</h3>
A premium bond can be defined as the buying and selling of a bond above its face price, in other words; its expenses are greater than the face quantity of the bond.
A bond would possibly exchange at a premium due to the fact its interest charge is better than cutting-edge rates withinside the market.
As per the given information:
Par value = $1000
Percentage of corporate coupon = 6.5%
the call premium is for one-year coupon payments
call premium = 1-year coupon
call premium = 1000 x 6.5% = 65
The price paid to the bondholder = Par value + call premium
Putting all value to get the total price to be paid to the bondholder
Price paid to the bondholder = 1000 + 65 = $1065
Hence, The price paid to the bondholder would be equal to $1065 if the issuer calls the bond.
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