$2.$ Suppose that you are considering the purchase of a coupon bond with a face value of $$1,000$

that matures after four years. The coupon payments are $6$ percent of the face value per year.

a$.$ How much would you be willing to pay for this bond if the market interest rate $($that is$,$ the

best alternative investment option$)$ is also $6$ percent?

b$.$ Suppose that you have just purchased the bond, and suddenly the market interest rate falls

to $5$ percent. What is the bond worth now?

c$.$ Suppose that one year has elapsed, you have received the first coupon payment, and the

market interest rate is still $5$ percent. How much would another investor be willing to pay

for your bond?

d$.$ Suppose that two years have elapsed since you purchased the bond, and you have received

the first two coupon payments. Now suppose that the market interest rate suddenly jumps

to $10$ percent. How much would another investor be willing to pay for your bond?Suppose that you are considering the purchase of a coupon bond with a face value of $$1,000$

that matures after four years. The coupon payments are $6$ percent of the face value per year.

a$.$ How much would you be willing to pay for this bond if the market interest rate $($that is$,$ the

best alternative investment option$)$ is also $6$ percent?

b$.$ Suppose that you have just purchased the bond, and suddenly the market interest rate falls

to $5$ percent. What is the bond worth now?

c$.$ Suppose that one year has elapsed, you have received the first coupon payment, and the

market interest rate is still $5$ percent. How much would another investor be willing to pay

for your bond?

d$.$ Suppose that two years have elapsed since you purchased the bond, and you have received

the first two coupon payments. Now suppose that the market interest rate suddenly jumps

to $10$ percent. How much would another investor be willing to pay for your bond?