1 If the bonds are non-callable, what is the price of the bonds today? (30 marks) Stature...
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1 If the bonds are non-callable, what is the price of the bonds today? (30 marks)
Stature Technologies plans to issue £100 million of bonds with a face value of £100,000, coupon rate of 4.125 per cent and 10 years to maturity. The current yield to maturity of these bonds is 4 per cent. In one year, the yield to maturity on the bonds will be either 6 per cent or 3.75 per cent with equal probability. Assume investors are risk-neutral.
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