If interest rates are currently 9 percent on comparable


Junk Corp.'s high-yield bond has the following features: Principal $1,000 Coupon 10% Maturity 5 years Special features: Company may extend the life of the bond to 10 years a) If interest rates are currently 12 percent on comparable high-yield securities and are not expected to change, what is the price of this bond? b) If interest rates are currently 9 percent on comparable high-yield securities and are not expected to change, what is the price of this bond? c) If interest rates are currently 9 percent on comparable high-yield securities but the investor has no forecast as to future rates, what is the possible range of prices for this bond?

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Finance Basics: If interest rates are currently 9 percent on comparable
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