Assets, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent, a par value of $1,000, semiannual coupons, and 15 years to maturity. The current market interest rate on these bonds is 7 percent. In one year, the interest rate on the bonds will be either 12 percent or 4 percent with equal probability. Assume investors are risk-neutral.

a. If the bonds are noncallable, what is the price of the bonds today?

b. if the bonds are callable one year from today at $1,050, will their price be greater or less than the price you computed in part (a)?