Business, 18.08.2021 15:40 kyra737

A firm intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,400. One-year interest rates are 8 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent, and a 40 percent probability that they will be 7 percent. Assuming that the bonds will be called if interest rates fall, what annual coupon should the bond pay in order to sell at par value

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A firm intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,...

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