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 is set at $150 over par value There is a 40 chance that the interest rate in one year will be 12 , and a 60 chance ...

Calculation of value of the bond or Present value of the bond F ...

New Business Ventures, Inc has an outstanding perpetual bond with a 10 percent coupon rate that can

Question:

New Business Ventures, Inc has an outstanding perpetual bond with a 10 percent rate that can be called in one year. The bond makes annual payments. The call premium is set is set at $150 over par value. There is a 40 % chance that the interest rate in one year will be 12%, and a 60% 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?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...