Business, 29.10.2019 00:31 dthompson365
New business ventures, inc., has an outstanding perpetual bond with a coupon rate of 12 percent that can be called in one year. the bond makes annual coupon payments and has a par value of $1,000. the call premium is set at $120 over par value. there is a 60 percent chance that the interest rate in one year will be 14 percent, and a 40 percent chance that the interest rate will be 9 percent. if the current interest rate is 12 percent, what is the current market price of the bond?
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