1) A bond has a time to maturity of n=9 yrs, a coupon rate if 7% (paid semi-annually), and a maturity value of M=1000. The bond was issued six years ago.

Determine the market price of the bond if the market rate of interest is 7%.

Determine the market price of the bond if the market rate of interest is 7.25%.

Graph the relationship between bond prices and interest rates and explain the relationship between bond prices and interest rates.