Calculate the price of the callable bond

Assignment Help Finance Basics
Reference no: EM133004649

Rambustan ICo wants to release a perpetual callable bond that pays 10.24% annual coupons. interest rate 8.8%. Two years after, there is 17% probability that the interest rate will be 5%, 29% probability that the interest rate will be 9.4% and 54% probability that the interest rate will be 12.8%.

Bbond is callable at par value of 1,000 + 2 additional coupon payments and it will be called if the bond price is greater than the call price.

Calculate the price of the callable bond.

What is the value of the call option?

What is the minimum coupon rate that the bond will be certainly called in two years?

Reference no: EM133004649

Questions Cloud

Make journal entries for splish company to record : Make journal entries for Splish Company to record all the events in June and July. On June 3, 2020, Splish Company sold to Ann Mount merchandise
Effects of stock dividend and the stock split correct : Are the above two statements about the effects of stock dividend and the stock split correct? Explain the reason
Amount of the segregated fund portfolio : Rhonda owns a flower shop. Her non-registered investments consist of $350,000 in segregated funds and $50,000 in a money market fund. She has business-related d
Discuss if allocated company is a reporting entity : Discuss if your allocated company is a reporting entity, provide specific and detailed examples and factors from your allocated company to support
Calculate the price of the callable bond : Rambustan ICo wants to release a perpetual callable bond that pays 10.24% annual coupons. interest rate 8.8%. Two years after, there is 17% probability that the
Discuss limitations of the conceptual framework : General-purpose financial statements, describe and discuss the objectives and limitations of the conceptual framework for financial accounting.
What is the approximate amount of loan payment : You are buying a cottage in Muskoka for $1.8 million, and are paying $725,000 down in cash. Today, you are financing the balance with a 25 year loan with monthl
What is total return for last year : What is your total return for last year? You bought a share of 4 percent preferred stock for $95.53 last year. The market price for your stock is now $96.75.
Digital care framework : Accessibility of assistive technologies to progress the residents' autonomy and that all healthcare suppliers should embrace a digital care framework

Reviews

Write a Review

Finance Basics Questions & Answers

  Discuss the differences in the benefits to farmers

uppose the government wants to increase the price of a specific agricultural product. Discuss the welfare effects of four possible policies: price floor, price support, production quota and voluntary production reduction. Which policy is least effici..

  What cash flow must the investment

What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X?

  Imagine you are a representative of management at mcdonalds

imagine you are a representative of management at mcdonalds and you must make a capital budgeting decision.nbsp the

  What will the stock price of harrods be after acquisition

If Harrods offers 4 million shares of its stock in exchange for the 11 million shares of Selfridge, what will the stock price of Harrods be after the acquisition?

  Record the two transactions for bill law firm

Bill's law firm perfumed legal services for a client who could not pay immediately. The business expects to collect $11000 the following month. Later the business received $6600 cash from client. Record the two transactions for Bill Law firm. Include..

  Calculate the economic value added

Home Depot entered fiscal 2017 with a total capitalization of $21,937 million. In 2017, debt investors received interest income of $888 million.

  Business value of social networks

Business value of social networks

  What is the internal rate of return

What is the internal rate of return (IRR) for an investment costing $500,000 that is expected to produce cash flow of $300,000 at the end of year 1, $200,000

  Discuss the federal tax code

Summarizing What changes would you recommend if you were in charge of revising the federal tax code? Explain your answer in a written paragraph.

  Find the stream function and sketch the streamlines

At what point on the surface of the circular cylinder in a potential flow does the pressure equal the free-stream pressure?

  Identify investments in financial institutions such as

identify investments in financial institutions such as savings associations credit unions insurance companies or a

  Produce a valuation estimate for cermco

Produce a valuation estimate for Cermco for December 31, 20X5. Use whatever valuation method you think best but justify your choice.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd