A company issues a $1,000 perpetual bond. The current rate is 6%. Next period, the rate...

A company issues a $1,000 perpetual bond. The current rate is 6%. Next period, the rate

will change to either 4% or 10%, with equal probability. The bond is callable at the end

of the first year only, for a price of $1,117.90. What is the coupon amount, if the bond

sells at par?

The answer is $83.51. Please show how this was reached.

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Expert Solution

jeff jeffy answered 3 months ago

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