FIN 620 Homework Assignment 3
Problem 15-6 Valuing Callable Bonds
New Business Ventures, Inc., has an outstanding perpetual bond with a 10 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $150 over par value. There is a 60 percent chance that the interest rate in one year will be 12 percent, and a 40 percent chance that the interest rate will be 7 percent. If the current interest rate is 10 percent, what is the current market price of the bond?
Problem 15-4 Corporate Voting
Candlebox Inc. is going to elect six board members next month. Betty Brown owns 17.4 percent of the total shares outstanding.
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