If the bonds are noncallable, what is the price of the bonds today?
Assets, Inc. plans to issue $5 million of bonds with a coupon rate of 7%, a par value of $1,000, semiannual coupons, and 30 years to maturity. The current market interest rate on these bonds is 6%. In one year, the interest rate on the bonds will be either 9% or 5% with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the […]