What price would the bonds sell

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Question: Dooley, Inc., has outstanding $100 million bonds that pay an annual coupon rate of interest of 11 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 10 years. Because of Dooley's increased risk, investors now require a 13 percent rate of return on bonds of similar quality with 5 years remaining until maturity. The bonds are callable at 110 percent of par at the end of 5 years.

What price would the bonds sell for assuming investors do not expect them to be called?

What price would the bonds sell for assuming investors expected them to be called at the end of 5 years?

Excel hint: PV(rate = discount rate for each period, nper = # of coupons, pmt = coupon, fv = par, type = 0)

Reference no: EM132211404

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