3. Bond valuation Choose the correct answer in each drop down box in the passage ( options written below in order of passage) -Select- constant / inverse / parallel falls / rises / stabilizes falls / rises / stabilizes par / discount / premium increase / decrease / flatten par / discount / premium increase / decrease / flatten

For fixed-rate bonds it's important to realize that the value of the bond has an) -Select- y relationship to the level of interest rates. If interest rates rise, then the value of the bond -Select- ; however, if interest rates fall, then the value of the bond -Select- . A -Select- v bond is one that sells below its par value. This situation occurs whenever the going rate of interest is above the coupon rate. Over time its value will -Select- v approaching its maturity value at maturity. A -Select- bond is one that sells above its par value. This situation occurs whenever the going rate of interest is below the coupon rate. Over time its value will -Select- v approaching its maturity value at maturity. A par value bond is one that sells at par; the bond's coupon rate is equal to the going rate of interest. Normally, the coupon rate is set at the going market rate the day a bond is issued so it sells at par initially. Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 8.8%, what is the value of the bond? Do not round intermediate calculations. Round your answer to the nearest cent. Quantitative Problem: Potter Industries has a bond issue outstanding with a 6% coupon rate with semiannual payments of $30, and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 8.8%, what is the value of the bond? Do not round intermediate calculations. Round your answer to the nearest cent