tsbury Ltc. has issued a bond two years ago with a par value of Rp100 million. The maturity of the bond is 15 years, with a coupon rate of 10%. The bond can be called (callable bond) in year 10 with a premium price of 25% above par value. The risk-free rate is 5% and the investor risk premium is 3%. Tax rate is 25%. Based on the information, calculate the intrinsic value of the bond based on: (a) call
tsbury Ltc. has issued a bond two years ago with a par value of Rp100 million. The maturity of the bond is 15 years, with a coupon rate of 10%. The bond can be called (callable bond) in year 10 with a premium price of 25% above par value. The risk-free rate is 5% and the investor risk premium is 3%. Tax rate is 25%. Based on the information, calculate the intrinsic value of the bond based on: (a) call
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Catsbury Ltc. has issued a bond two years ago with a par value of Rp100 million. The maturity of the bond is 15 years, with a coupon rate of 10%. The bond can be called (callable bond) in year 10 with a premium price of 25% above par value. The risk-free rate is 5% and the investor risk premium is 3%. Tax rate is 25%. Based on the information, calculate the intrinsic value of the bond based on: (a) callable provision; (b) normal maturity.
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