corporated, plans to issue $8 million of bonds with a coupon rate of 7.1 percent, a par value of $1,000, semiannual coupons, and 20 years to maturity. The current market interest rate on these bonds is 6.6 percent. In one year, the interest rate on the bonds will be either 9 percent or 4 percent with equal probability. Assume investors are risk-neutral. If the bonds are noncalla

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Assets, Incorporated, plans to issue $8 million of bonds with a coupon rate of 7.1 percent, a par value of $1,000, semiannual coupons, and 20 years to maturity. The current market interest rate on these bonds is 6.6 percent. In one year, the interest rate on the bonds will be either 9 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?

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