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Microsoft plans to issue $10 million of bonds with a coupon rate of 8 percent, a par value of $1,000, semiannual coupons, and 30 years
Microsoft plans to issue $10 million of bonds with a coupon rate of 8 percent, a par value of $1,000, semiannual coupons, and 30 years to maturity. The current market interest rate on these bonds is 10 percent. In three year, the interest rate on the bonds will be either 12 percent, 10 percent or 8 percent with equal probability. If the bonds are noncallable, what is the price of the bonds today? (Assume investors are risk-neutral.) Numeric Response
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