Assets, Incorporated, plans to issue $7 million of bonds with a coupon rate of 8.1 percent, a par value of $1,000, semiannual coupons, and 20 years to maturity. The current market interest rate on these bonds is 7.5 percent. In one year, the interest rate on the bonds will be either 9 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.)

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)? multiple choice Lesser Greater