Golden Knight has bonds outstanding with a $1,000 face value and 9 years left until maturity....

Golden Knight has bonds outstanding with a $1,000 face value and 9 years left until maturity. They have an 11% annual coupon payment, and their current price is $1,200. The bonds may be called in 5 years at 109% of face value.

The bond’s indenture indicates that the call provision gives the firm the right to call the bonds at the end of each year beginning in Year 5. In Year 5, the bonds may be called at 109% of face value; but in each of the next 4 years, the call percentage will decline by 1%. Thus, in Year 6, they may be called at 108% of face value; in Year 7, they may be called at 107% of face value; and so forth. If interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds? (Bonus credits: 3 points)

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