Find the price of an equivalent bond without the call option

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Reference no: EM13803991

ABC Manufacturing Company makes baseball equipment. The company decides to issue a callable bond that it expects to sell for $820 per bond. If the bond is a twenty-year semi annual bond with a 8% coupon rate and a current yield to maturity of 9%, what is the cost of the option attached to the bond? (Assume $1000 par value). Hint: find the price of an equivalent bond without the call option.

Reference no: EM13803991

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