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ds KIC, Inc percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest
ds KIC, Inc percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate on the bonds will be either 10 percent or 6 percent with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the price of the bonds today? b. If the bonds are callable one year from today at $1,080, will their price be greater or less than the price you computed in (a)? Why? ds KIC, Inc percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate on the bonds will be either 10 percent or 6 percent with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the price of the bonds today? b. If the bonds are callable one year from today at $1,080, will their price be greater or less than the price you computed in (a)? Why
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