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April 21, 2014

Homework Help: Finance

Posted by Dora on Saturday, September 10, 2011 at 9:22pm.

Zabberer Corporation bonds pay a coupon rate of interest of 12 percent annually and have a maturity value of $1000. The bonds are scheduled to mature at the end of 14 years. The company has the option to call the bonds in 8 years at the premium of 12 percent above the maturity value you believe the company will exercise its option to call the bonds at that time. If you require a pretax return of 10 percent on bonds of this risk, how much would you pay for one of these bonds today?

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