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Assets, Incorporated, plans to issue $7 million of bonds with a coupon rate of 7.7 percent, a par value of $1,000, semiannual coupons, and 30
Assets, Incorporated, plans to issue $7 million of bonds with a coupon rate of 7.7 percent, a par value of $1,000, semiannual coupons, and 30 years to maturity. The current market interest rate on these bonds is 7.2 percent. In one year, the interest rate on the bonds will be either 8 percent or 4 percent with equal probability. Assume investors are risk-neutral.
If the bonds are noncallable, what is the price of the bonds today?
Price of Bonds:
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