Klondike Adventure, Inc., has outstanding $100 million bonds that pay an annual coupon rate of interest of 11 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 10 years. Because of Dooleys increased risk, investors now require a 13 percent rate of return on bonds of similar quality. The bonds are callable at 110 percent of par at the end of 5 years.

What price would the bonds sell for assuming investors do not expect them to be called?

What price would the bonds sell for assuming investors expected them to be called at the end of 5 years?

Excel hints:

Review the time line and cash flow amount for the regular and callable bond.

PV(rate = discount rate for each period, nper = # of coupons, pmt = coupon, fv = par, type = 0)

-------------

Klondike - 2

According to the call features, what is the terminal value at the call date?

Group of answer choices

900

1200

1000

1100 this answer is not correct

Question 41 0 / 2 pts Klondike - 2 According to the call features, what is the terminal value at the call date? 1100 1000 900 1200