CORSO BOOKS HAS JUST SOLD A CALLABLE BOND. ITS A THIRTY-YEAR SEMI-ANNUAL BOND WITH AN ANNUAL COUPON RATE OF 8% AND $1000.00 PAR VALUE. THE ISSUER, HOWEVER, CAN CALL THE BOND STARTING AT THE END OF 8 YEARS. IF THE YIELD TO CALL BOND IS 6% AND THE CALL REQUIRES CORSO BOOKS TO PAY ONE YEAR OF ADDITIONAL INTEREST AT THE CALL (2 COUPON PAYMENTS). WHAT IS THE THE BOND PRICE IF PRICED WITH THE ASSUMPTION THAT THE CALL WILL BE ON THE FIRST AVAILABLE CALL DATE ?

CORSO BOOKS HAS JUST SOLD A CALLABLE BOND. ITS A THIRTY-YEAR SEMI-ANNUAL BOND WITH AN ANNUAL COUPON RATE OF 8% AND $1000.00 PAR VALUE. THE ISSUER, HOWEVER, CAN CALL THE BOND STARTING AT THE END OF 8 YEARS. IF THE YIELD TO CALL BOND IS 6% AND THE CALL REQUIRES CORSO BOOKS TO PAY ONE YEAR OF ADDITIONAL INTEREST AT THE CALL (2 COUPON PAYMENTS). WHAT IS THE THE BOND PRICE IF PRICED WITH THE ASSUMPTION THAT THE CALL WILL BE ON THE FIRST AVAILABLE CALL DATE ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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