Donate SIGN UP
Home > Business & Finance > Finance Problem

Finance Problem

Avatar Image
chinadoll95 | 00:29 Tue 12th Jun 2007 | Business & Finance
0 Answers
KIC, Inc., plans to issue $5 million of perpetual bonds. The face value of each bond is $1,000. The annual coupon on the bonds is 12 percent. Market interest rates on one-year bonds are 11 percent. With equal probability, the long-term market interest rate will be either 14 percent or 7 percent next year. Assume investors are risk-neutral.
A. If the KIC bonds are noncallable, what is the price of the bonds?
B. If the bonds are callable one year from today at $1,450, will their price be greater than or less than the price you computed in (a)? Why?
prev copyright laws
  
next parking of works vans
Gravatar

Answers

rss feed

Best Answer

Nobody has yet answered this question. Once some answers have been given, chinadoll95 will be able to select one answer as the best. Once a best answer has been selected, it will be shown here.

For more on marking an answer as the "Best Answer", please visit our FAQ.
There are no answers available for this question.

rss feed

Do you know the answer?

Finance Problem

Answer Question >>