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The problem refers to the bonds of The Apollo Corporation, all of which have a call feature. The call feature allows Apollo to pay off
The problem refers to the bonds of The Apollo Corporation, all of which have a call feature. The call feature allows Apollo to pay off bonds anytime after the first 15 years, but requires that bondholders be compensated with an extra year's interest at the coupon rate if such a payoff is exercised. Apollo's Alpha bond was issued 10 years ago for 30 years with a face value of $1,000. Interest rates were very high at the time, and the bond's coupon rate is 20%. The interest rate is now 10%. Assume bond coupons are paid semiannually. At what price should an Alpha bond sell? Round the answer to the nearest cent. $________At what price would it sell without the call feature? Round the answer to the nearest cent. $___________
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