What price would the bonds sell

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Question - Dooley, Inc., has outstanding $150 million (par value) bonds that pay an annual coupon rate of interest of 11.5 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 15 years. Because of Dooley's increased risk, investors now require a 14 percent rate of return on bonds of similar quality with 15 years remaining until maturity. The bonds are callable at 109 percent of par at the end of 9 years.

Required -

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

b. What price would the bonds sell for assuming investors expect them to be called at the end of 9 years?

Reference no: EM133129047

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