1. A 30-year bond pays interest semiannually, has a par value of $1,000, a coupon rate of 15%, and has 20 years until maturity. The bond has a feature that allows the bond to be called after 15 years, with a call premium of 1.5 years of interest. Bonds of similar risk are discounted at a market rate of 5%.
   1. (10 pts) What is the value of the bond if the market does not expect the bond to be called?

1. (10 pts) What is the value of the bond, if the market expects the bond to be called? How does this condition affect its price?