Solution-Calculating the issue price of callable bond

Calculating the issue price of callable bond

Reference no: EM133056419

QWE wishes to issue a perpetual callable bond that pays 7.7% annual coupon. The current interest rate is 7.7%. Next year, the interest rate will be 3.1% or 9.4% with equal probability. The bond is callable at $1,050, and it will be called if the interest rate drops to 3.1%. What is the issue price of this callable bond?

Reference no: EM133056419

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Calculating the issue price of callable bond

Reference no: EM133056419

Reference no: EM133056419

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