Dooley, Inc., has outstanding $155 million (par value) bonds that pay an annual coupon rate of interest of 15.5 percent. Par value of each bond is $1,800. The bonds are scheduled to mature in 17 years. Because of Dooley's increased risk, investors now require a 14 percent rate of return on bonds of similar quality with 17 years remaining until maturity. The bonds are callable at 113 percent of par at the end of 12 years.

2. What price would the bonds sell for assuming investors do not expect them to be called? $
4. What price would the bonds sell for assuming investors expect them to be called at the end of 12 years? $

Answer rating: 100% (QA)

To calculate the price of the bonds we can use the present value of the bonds future cash flows 1 Pr... View the full answer