You plan to issue 6 million of perpetual bonds.  The face value of
each bond is 1,00 and the semi-annual coupon is 4.5%. Market interest
rates on one year bonds are 8%. With equal probability the long term
market interest rate will be either 12% or 6% next year.  Assume
investors are risk neutral.
If the bonds are noncallable what is the price of the bonds?
If the bonds are callable one year from today at 1,250 will their
price be greater than or less than the price of noncallable bonds?