Problem $15-8$ Valuing Callable Bonds

Assets, Incorporated, plans to issue $$8$ million of bonds with a coupon rate of $8\mathrm{.}2$ percent, a par value of $$1,000,$ semlannual coupons, and $25$ years to maturity. The curent market interest rate on these bonds is $76$ percent. In one year, the interest rate on the bonds will be either $9$ percent or $5$ percent with equal probability. Assume investors are risk$-$neutral.

$0.$ 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$.,32\mathrm{.}16.)$

Pilce of he bonds $|$

b$.$ If the bonds are callable one year from today at $$1,070,$ will their price be greater or less than the price you computed in part $($a$)?$

tesser

Greater