Last year, a firm issued 30-year, 8% annual coupon bonds at a par value of $1,000. (1)

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Last year, a firm issued 30-year, 8% annual coupon bonds at a par value of $1,000. (1) Suppose that 1 year later the going rate drops to 6%. What is the new price of the bonds, assuming that they now have 29 years to maturity? ($1,271.81) (2) Suppose instead that 1 year after issue, the going interest rate increases to 10% (rather than dropping to 6%). What is the price?

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Intermediate Financial Management

ISBN: 9781337395083

13th Edition

Authors: Eugene F. Brigham, Phillip R. Daves

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