2a. Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year later the going market interest rate drops to 6%. What is the new price of the bonds assuming that they now have 19 years to maturity? 2b. Suppose that one year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been?
2a. Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year later the going market interest rate drops to 6%. What is the new price of the bonds assuming that they now have 19 years to maturity? 2b. Suppose that one year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 21P: Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an...
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2a. Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year later the going market interest rate drops to 6%.
What is the new price of the bonds assuming that they now have 19 years to maturity?
2b. Suppose that one year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been?
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