Question
Can anyone solve this question please..its urgent Subject corporate finance Alpha plc plans to issue 100 million of bonds with a face value of 50,000,
Can anyone solve this question please..its urgent
Subject corporate finance
Alpha plc plans to issue 100 million of bonds with a face value of 50,000, coupon rate of 4 per cent and 10 years to maturity. The current market interest rate on these bonds is 7 per cent. In one year, the interest rate on the bonds will be either 8 per cent with 60 percent probability or 5 per cent with 40 percent probability. (a) If the bonds are non-callable, what is the price of the bonds today? (10 marks)
(b) If the bonds are callable one year from today, will their price be greater than or less than the price you computed in (a)? Discuss your answer from investors point of view. (5 marks)
(c) If a call price is 50,000, would the firm call the bonds? Please explain your answer (5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started