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What price are investors willing to pay for the bond

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Question - Cupper Bhd. plans to issue RM5 million bonds with a coupon rate of 5%, a par value of RM100, annual coupon, 25 years maturity and the call price of RM105. The bond is only callable after 2 years issued. The current market interest rate is 5%. There is an equal chance for the interest rate two years from now to be 4.0% and 5.5%. What price are investors willing to pay for the bond?

Reference no: EM132949189

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