[Q: 6-4800342] Callable Bond Pricing (15 points total). Kohl's Corporation (KSS) has just issued a thirty-year bond with

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Q 6 4800342 Callable Bond Pricing 15 Points Total Kohl S Corporation Kss Has Just Issued A Thirty Year Bond With 1 (32.16 KiB) Viewed 48 times

[Q: 6-4800342] Callable Bond Pricing (15 points total). Kohl's Corporation (KSS) has just issued a thirty-year bond with a par value of $1,000 and a coupon rate of 7.1%, paid semiannually. The bond includes a call provision that allows KSS to call the bond in ten years at a call price of $1110. The yield to maturity is currently 7.1%, compounded semiannually, and it is expected to remain at that value until ten years from today. Ten years from today, there is a 25% probability that the yield to maturity will permanently decrease to 4.5%, compounded semiannually, and a 75% probability that the yield to maturity does not change throughout the life of the bond. Part A (5 Points): If the yield to maturity decreases to 4.5%, what is the price of this bond ten years from today? The bond price in ten years would be: $_- (Round your answer to two decimal places and use the rounded value in Part B). Part B (5 Points): What is the price of this bond today? The bond price today is: $ (Round your answer to two decimal places). Part C (5 Points): What is the price of an equivalent bond with no call provision? The bond price today is: $ - (Round your answer to two decimal places).