Kohl's Corporation​ (KSS) has just issued a​ thirty-year bond with a par value of $1,000 and a coupon rate of 7.7%​, paid semiannually. The bond includes a call provision that allows KSS to call the bond in ten years at a call price of ​$1100. The yield to maturity is currently 7.7​%, compounded​ semiannually, and it is expected to remain at that value until ten years from today. Ten years from​ today, there is a 29​% probability that the yield to maturity will permanently decrease to 4.8​%, compounded​ semiannually, and a 71​% probability that the yield to maturity does not change throughout the life of the bond.
Part A ​: If the yield to maturity decreases to 4.8​%​, what is the price of this bond ten years from​ today?
The bond price in ten years would​ be:
Part B ​ What is the price of this bond​ today?
The bond price today​ is:
Part C ​ What is the price of an equivalent bond with no call​ provision?
The bond price today​ is: