Redemption based on her expectations of interest rates

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ABC Corporation has issued callable bonds that have 8% annual coupon rate paid semianmally. Bonds could be redeemed starting from the end of year 2. The call premium equals the amount of the annual coupon. The bonds mature in 8 years, have a face value of $1000 and a yield to maturity of 10%. The economy is expected to plunge into recession. What is the value of these bonds if the investor considers a possibility of earlier redemption based on her expectations of interest rates?

Reference no: EM13953667

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Redemption based on her expectations of interest rates : Show transcribed image text ABC Corporation has issued callable bonds that have 8% annual coupon rate paid semianmally. Bonds could be redeemed starting from the end of year 2. The call premium equals the amount of the annual coupon. What is the val..

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