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  3. consider a $1,000 par, 12% annual coupon bond with

Consider a $1,000 par, 12% annual coupon bond with an embedded call option exercisable any...

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Finance

Consider a $1,000 par, 12% annual coupon bond with an embedded call option exercisable any time
(including immediately) at 105% of par and 2 years until maturity. Assume the call option will be
exercised if it is at all profitable to do so. Using a two-period binomial model with the following
interest rate tree, compute the value of the bond. (3 points)Consider a $1,000 par, 12% annual coupon bond with an embedded call option exercisable any time
(including immediately) at 105% of par and 2 years until maturity. Assume the call option will be
exercised if it is at all profitable to do so. Using a two-period binomial model with the following
interest rate tree, compute the value of the bond. (3 points)
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