Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today? b. Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco’s bonds over time?
Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today? b. Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco’s bonds over time?
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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Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually.
a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today?
b. Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco’s bonds over time?
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