Multiple Choice
A firm wishes to issue a perpetual callable bond. The current interest rate is 7%. Next year, the interest rate will be 6.5% or 8.25% with equal probability. The bond is callable at €1,075, and it will
Be called if the interest rate drops to 6.5%.
If the coupon were set to €70 what would the bond sell for?
A) € 824.61
B) € 898.82
C) € 964.25
D) €1,000.00
E) €1,031.74
Correct Answer:
Verified
Correct Answer:
Verified
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