Nike launched a callable bond issue on June 2016 with maturity date on June 2026. This bond issue has a coupon rate of 3.25%, paid semiannually. The bond was issued at par in June 2016.

1. REQUIRED
2. a.  If Nike decides to call this bond issue on June 2023 and interest rates in the market have risen to 4%, what is the expected price of the bond in 2023?
3. b. Calculate the yield to call if the UA decides to call the bond in June 2023 under the conditions in part (a)?
4. c. What are the chances that UA would call the bond if the conditions in part (a) apply? Explain.

Answer rating: 100% (QA)

SOLUTION a To calculate the expected price of the bond if Nike decides to call it in June 2023 we need to compare the bonds yield to its coupon rate I... View the full answer