Problem 5-21 Bond Valuation and Changes in Maturity and Required Returns Suppose
ID: 2776778 • Letter: P
Question
Problem 5-21
Bond Valuation and Changes in Maturity and Required Returns
Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments.
Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 7%. At what price would the bonds sell? Round the answer to the nearest cent.
$
Suppose that 2 years after the initial offering, the going interest rate had risen to 13%. At what price would the bonds sell? Round the answer to the nearest cent.
$
Explanation / Answer
Problem 5-21 Bond Valuation and Changes in Maturity and Required Returns Suppose