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U. I ule uuU 15 LAPA 15. (Callable bond) Bostitch Inc. has an outstanding 25% bond that pays interest semi-annually. The 20-year bond has 15
U. I ule uuU 15 LAPA 15. (Callable bond) Bostitch Inc. has an outstanding 25% bond that pays interest semi-annually. The 20-year bond has 15 years until maturity and has a face value of $1,000. Bostitch, realizing that the bonds were issued at a relatively high interest rate era, has a call feature in the indenture of the bond. This feature requires Bostitch to pay one year of interest in the event that Bostitch calls the bond. The bonds are callable after 10 years upon issuance, and currently has a yield of 10% a. If the bond is not expected to be called, what is the price of the bond? b. If the bond is expected to be called, what is the price of the bond upon value
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