15-6 valuing callable bond

Project Description:

new business ventures, inc. has an outstanding perpetual bond with a 10 percent coupon rate that can be called in one year. the bond makes annual coupon payments. the call premium is set at $150 over par value. there is a 60 percent chance that the interest rate in one year will be 12 percent, and a 40 percent chance that the interest rate will be 7 percent. if the current interest rate is 10 percent, what is the current market price of the bond?
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Price Type: Negotiable

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