Last year a firm issued 20-year, 8 percent annual coupon bonds that sold at a par value of $1,000. (1) Suppose that one year after issue the going interest rate for these bonds was 6 percent. What is the price of the bonds, assuming that the bonds now have 19 years to maturity? (2) Suppose that one year after issue the going interest rate for these bonds was 10 percent (rather than 6 percent).

What is the price of the bonds, assuming that the bonds now have 19 years to maturity?

AppendixLO1