The Apollo Corporations bond has a call feature that allows Apollo to pay off the bond anytime after the first 15 years but requires that bondholders be compensated with two years of interest at the coupon rate. Apollos bond was issued at a time when interest rates were higher. It has a coupon rate of 22%, a $1,000 face value, an initial term of 30 yrs, and it is now 13 years old.

(2pts) If the market interest rate is currently 10% and is expected to remain at this relatively low level for the foreseeable future, should Apollo Corp. refund the bond (issue new bonds and call the existing bond)? Explain.

(4 pts) Calculate the price of the bond if the market expects the bond to be called as soon as possible.

(4 pts) What would be the price of the bond if it had no call feature?