User Account

All Pages

Calculate the price of the callable bond

Assignment Help Finance Basics
Reference no: EM133114480

GoGo Inc. plans to issue a perpetual callable bond that pays 11.4% annual coupons. The current interest rate is 8%. Two years later, there is 15% probability that the interest rate will be 4.5%, 30% probability that the interest rate will be 10% and 55% probability that the interest rate will be 12%. The bond is callable at par value of 1,000 plus 3 additional coupon payments and it will be called if the bond price is greater than the call price.

  1. Calculate the price of the callable bond.
  2. What is the value of the call option?
  3. What is the minimum coupon rate that the bond will be certainly called in two years?

Reference no: EM133114480

Questions Cloud

What is assessment of reasoning : Your firm has been plodding along without much attention from the stock market; both analysts and investors are not showing much interest in your company. Your
Sovereign debt of emerging economies : Discuss why the sovereign debt of emerging economies could be destabilising for the global economy
Cash-our refinancing and rate term refinancing : As a mortgage manager, you are expected to explain the difference between cash-our refinancing and rate/term refinancing. Provide a detailed explanation.
What amount should be included in the consolidated statement : What amount should be included in the consolidated statement of financial position at December 31, 2020, for the equipment cost and accumulated depreciation
Calculate the price of the callable bond : GoGo Inc. plans to issue a perpetual callable bond that pays 11.4% annual coupons. The current interest rate is 8%. Two years later, there is 15% probability th
What is the gain or loss on the reacquisition : All adjusting entries for 2017 have been made. What is the gain or loss on the reacquisition? Record a loss as a negative number
Determine brent federal tax payable for 2021 : Brent Wells is single and lives alone. During 2021 he earned employment income of $73,500. His employer withheld EI ($890) and CPP ($3,166) contributions of $4,
Explain the three budgeting methods : Explain the three budgeting methods (Payback Period, NPV, IRR). Include details and examples so your investors can understand the advantages and disadvantages
How can you detect this earnings management activity : Who will be affected by this proposed action and why? If you are the analyst of the company, how can you detect this earnings management activity

Reviews

Write a Review

Finance Basics Questions & Answers

  Find an example of print communication

With a partner, discuss why the creator of the message may have chosen a print medium. In your opinion, was this the best choice?

  Using the graph andintuition determine whether there is a

based on what you have learned from your research on regression analysis and correlation answer the following questions

  Determine what the spot price using continues time

Assume that you are given a one year forward price of $ 50 and domestic rate interest of 6% per annum. Determine what the spot price using continues time

  Incremental after-tax cash flows

Therefore, because depreciation is a non-cash expense, we should ignore its effects when evaluating projects." Critically evaluate this statement.

  Compute the volume mix and price revenue variances how did

analyze the variances in the following scenarioyou are the nursing administrator for a medical group that expects a

  Fifth national bank just issued some new preferred stock

Fifth National Bank just issued some new preferred stock. The issue will pay an annual dividend of $13 in perpetuity, beginning 18 years from now.

  Capital co has a capital structure based on current market

capital co. has a capital structure based on current market values that consists of 43 percent debt 11 percent

  Small business retirement plan

Larry hears about a small business retirement plan called the SIMPLE IRA.

  Dependent and independent variables

What is the difference between dependent and independent variables? I am truly having a problem finding the difference between the two.

  Set up an ira to fund retirement

Suppose you plan on working 45 years after graduating from college

  What is the payback period

You expect that it will generate additional revenue of $500 per month. What is the payback period?

  Assume a company computes the irr

Let's assume a company computes the IRR and it turns out to be 7%. How is it determined if that is good or bad?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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