ABC Inc intends to issue callable, perpetual bonds. The bonds are callable one year from today at $1,200 (i.e., the call-price). The current one-year interest is 12%. There is a 60% probability that, one year from today, the rates will be 15% and remain so for a long time. However, with a 40% probability, rates will be 8% and remain so. Suppose ABC wants to sell these bonds at $1,000. What must the coupon on the bonds be for ABC to be able to sell them? [Hint: Find the coupon at which the expected present value will equal the price of $1,000] ABC Inc intends to issue callable, perpetual bonds. The bonds are callable one year from today at $1,200 (i.e., the call-price). The current one-year interest is 12%. There is a 60% probability that, one year from today, the rates will be 15% and remain so for a long time. However, with a 40% probability, rates will be 8% and remain so. Suppose ABC wants to sell these bonds at $1,000. What must the coupon on the bonds be for ABC to be able to sell them? [Hint: Find the coupon at which the expected present value will equal the price of $1,000]