Zappo Corporation just issued $1,000 face value bonds that will mature in 20 years and have a 7% coupon rate.Interest is paid semi-annually and the required rate of return is 9 percent for these bonds.The bonds have a 5 year call provision that will pay a call premium of $1,050 if they are called in.What is the price of the Zappo Corporation bond?

Question

Quizplus · Accepted Answer

$$P _ { 0 } = \$ 35 \left( \frac { 1 - \frac { 1 } { 1.045 ^ { 10 } } } { .045 } \right) + \frac { \$ 1,050 } { 1.045 ^ { 10 } } = \$ 953.07$$

Zappo Corporation Just Issued $1,000 Face Value Bonds That Will