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Assets, Inc., plans to issue $6 million of bonds with a coupon rate of 9 percent, a par value of $1,000, semiannual coupons, and 30
Assets, Inc., plans to issue $6 million of bonds with a coupon rate of 9 percent, a par value of $1,000, semiannual coupons, and 30 years to maturity. The current market interest rate on these bonds is 8 percent. In one year, the interest rate on the bonds will be either 10 percent or 6 percent with equal probability. Assume investors are risk- neutral. a. If the bonds are noncallable, what is the price of the bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price of the bonds b. If the bonds are callable one year from today at $1,090, will their price be greater or less than the price you computed in part (a)? Greater Lesser
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