What will be the bond price if rates in the market decrease

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The Wildhorse Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 10.375 percent. The current market rate for similar securities is 10.5 percent. Assume that the face value of the bond is $1,000.

Problem 1: What is the current market value of one of these bonds? (Round answer to 2 decimal places, e.g. 15.25.)

Problem 2: What will be the bond's price if rates in the market (i) decrease to 8.50 percent or (ii) increase to 11.5 percent? (Round answers to 2 decimal places, e.g. 15.25.)

Problem 3: Suppose the bond were to mature in 12 years. What will be the bond's price if rates in the market (i) decrease to 8.50 percent or (ii) increase to 11.5 percent? (Round answers to 2 decimal places, e.g. 15.25.)

Reference no: EM132917510

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