1

Sarah just purchased a 15-year, $1,000 par value bond. The annual coupon rate on this bond is 6%, with interest being paid every 6 months. If the investor expects to earn a 8% simple rate of return on this bond, how much should she pay for it?

	a.	$774.84
	b.	$828.81
	c.	$695.34
	d.	$827.08
	e.	$437.11

2

If a bond is selling for more than its par value and the market interest rate remains unchanged during the life of the bond, then as the maturity date approaches, how will the price (value) of the bond change?

	a.	Increase
	b.	Remain unchanged
	c.	Decrease
	d.	Cannot determine