Company X has two perpetual and callable bond issues outstanding (A and B) with the following characteristics below. It can issue a new bond (with a lower coupon rate) and use the proceeds to pay back either bond. Which one should it refund? A / B / both / neither?
A. Coupon Rate 7%, Issue Size $125 million, Call Premium 7.5%, Cost to refund $11.5 million, Current YTM 6.25%
B. Coupon Rate 8%, Issue Size $132 million, Call Premium 8.5%, Cost to refund $13 million, Current YTM 7.1%