Goldman Sachs Group, Inc. (GS) has just issued a thirty-year bond with a par value of...
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Goldman Sachs Group, Inc. (GS) has just issued a thirty-year bond with a par value of $1,000 and a coupon rate of 6.8%, paid semiannually. The bond includes a call provision that allows GS to call the bond in ten years. The call premium is $90. The nominal one-year interest rate is currently 6.8%, compounded semiannually, and is expected to remain at that value for at least ten years. Ten years from today, there is a 26% probability that the yield to maturity will be 4.4%, compounded semiannually, and a 74% probability that the yield to maturity will be 6.8%, compounded semiannually. What is the price of this bond today? The price of this callable bond today is O A. $1,022.11 O B. $991.75 C. $1,062.59 O D. $1,042.35 O E. $1,011.99 Goldman Sachs Group, Inc. (GS) has just issued a thirty-year bond with a par value of $1,000 and a coupon rate of 6.8%, paid semiannually. The bond includes a call provision that allows GS to call the bond in ten years. The call premium is $90. The nominal one-year interest rate is currently 6.8%, compounded semiannually, and is expected to remain at that value for at least ten years. Ten years from today, there is a 26% probability that the yield to maturity will be 4.4%, compounded semiannually, and a 74% probability that the yield to maturity will be 6.8%, compounded semiannually. What is the price of this bond today? The price of this callable bond today is O A. $1,022.11 O B. $991.75 C. $1,062.59 O D. $1,042.35 O E. $1,011.99
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Answer rating: 100% (QA)
To calculate the price of the callable bond today we need to calculate the present value of its cash flows The bond has a par value of 1000 and a coup... View the full answer
Related Book For
Intermediate Microeconomics and Its Application
ISBN: 978-0324599107
11th edition
Authors: walter nicholson, christopher snyder
Posted Date:
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