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ABC wishes to issue a perpetual callable bond that pays 7.5% annual coupon. The current interest rate is 7.5%. Next year, the interest rate will

ABC wishes to issue a perpetual callable bond that pays 7.5% annual coupon. The current interest rate is 7.5%. Next year, the interest rate will be 2.6% or 9.6% with equal probability. The bond is callable at $1,050, and it will be called if the interest rate drops to 2.6%. What is the issue price of this callable bond?

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