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please help KIC Inc. plans to issue $5.0 million of bonds with a coupon rate of 10 percent paid semiannually and 30 years to maturity.
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KIC Inc. plans to issue $5.0 million of bonds with a coupon rate of 10 percent paid semiannually and 30 years to maturity. The current one-year market interest rate on these bonds is 9 percent. In one year, the interest rate on the bonds will be either 12 percent or 6 percent with equal probability. Assume investors are risk neutral. a. If the bonds are non-callable, what is the price of the bonds today? (Do not round intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price of the bonds b. If the bonds are callable one year from today at $1,455, will their price be greater or less than the price you computed in part (a)? Less than Greater than c. If the bonds are callable one year from today at $1,455, what is the current price of the bond? (Do not round intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current price of the bond d. What is the value of the call provision to the company? (Do not round intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Call value Step by Step Solution
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