How much would you pay for one of the bonds today

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Reference no: EM131338471

Zabberer Corporation bonds pay a coupon rate of interest of 12 percent annually and have a maturity value of $1,000. The bonds are scheduled to mature at the end of 14 years.

The company has the option to call the bonds in eight years at a premium of 12 percent above the maturity value. You believe the company will exercise its option to call the bonds at that time.

If you require a pretax return of 10 percent on bonds of this risk, how much would you pay for one of these bonds today?

Reference no: EM131338471

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