New Business Ventures Inc. has an outstanding perpetual bond with a 11 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $140 over par value. There is a 35 percent chance that the interest rate in one year will be 13 percent, and a 65 percent chance that the interest rate will be 8 percent. If the current interest rate is 11 percent, what is the current one-year market price of the bond? (Do not round intermediate calculations. Round the final answer to 2 decimal

New Business Ventures Inc. has an outstanding perpetual bond with a 11 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $140 over par value. There is a 35 percent chance that the interest rate in one year will be 13 percent, and a 65 percent chance that the interest rate will be 8 percent. If the current interest rate is 11 percent, what is the current one-year market price of the bond? (Do not round intermediate calculations. Round the final answer to 2 decimal

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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