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Assets, Inc., plans to Issue $7 million of bonds with a coupon rate of 10 percent, a par value of $1,000, semiannual coupons, and 15
Assets, Inc., plans to Issue $7 million of bonds with a coupon rate of 10 percent, a par value of $1,000, semiannual coupons, and 15 years to maturity. The current market Interest rate on these bonds is 9 percent. In one year, the Interest rate on the bonds will be either 12 percent or 6 percent with equal probability. Assume Investors are risk- neutral. 0.5 points 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 Print References b. If the bonds are callable one year from today at $1,060, will their price be greater or less than the price you computed In part (a)? Lesser O Greater
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