There is a 40 percent chance that the interest rate in one, Ask an Expert

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Valuing Callable Bonds New Business Ventures, Inc., has an outstanding perpetual bond with a 10 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $ 150 over par value. There is a 40 percent chance that the interest rate in one year will be 12 percent, and a 60 per-cent chance that the interest rate will be 7 percent. If the current interest rate is 10 percent, what is the current market price of the bond?

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