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Question: a) In 2010, Southern California Ellison issued 30 year bonds with 90 bp spread over the then 30-year Treasury yield and make-whole call provision. Suppose the bond is called on April 1, 2017. The make-whole call price will be determined based on the Treasury yield for a 30-year Treasury on April 1, 2017, plus a make-whole premium of 15 bp.

b) Suppose the bond is called on April 1, 2018. Under what conditions, will the holders of these make-whole bonds be harmed, in the sense of getting less than the market value of their bonds?

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