10.(Bond valuation) Kyser Public Utilities issued a bond with a $1,000 par value that pays $90 in annual interest. It matures in 15 years. Your required rate of return is 7 percent.

a. Calculate the value of the bond.

b. How does the value change if your required rate of return (1) increases to 11 percent or (2) decreases to 6percent?

c. Explain the implications of your answers in part (b) as they relate to interest rate risk, premium bonds, and discount bonds.

d. Assume that the bond matures in 5 years instead of 15 years. Recompute your answers in part (b).

e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds.