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Dragon Corporation has three types of debt outstanding, even though it has plenty of cash. Coupons are paid on March 1. Bond P is

 

Dragon Corporation has three types of debt outstanding, even though it has plenty of cash. Coupons are paid on March 1. Bond P is 10-year, 8% coupon, $1000 face value straight debt. Bond Q is 10-year, 8% coupon, $1000 face value debt, convertible into 20 shares on March 2, 2025. Bond R is 10-year, 8% coupon, $1000 face value debt, callable at 110 on March 2, 2025. Suppose, on March 2, 2025: Bond P has price 103; Dragon share price is 58. what is the quoted price of Bond R?

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SOLUTION To determine the quoted price of Bond R we need to calculate its yield to maturity taking into account the fact that it is callable at 110 on March 2 2025 The yield to maturity is the discoun... blur-text-image

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