Define what is the current market price of the bond

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Question: Pufu Inc has a bond that makes annual coupon payments. The bond is a perpetual one with a 9 percent coupon rate that can be called in one year. The call premium is set at $120 over par value. There is a 60 percent chance that the interest rate in one year will be 11 percent, and a 40 percent chance that the interest rate will be 6 percent. If the current interest rate is 9 percent, what is the current market price of the bond?

Reference no: EM132061430

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