A $$1,000$ bond has a $8\mathrm{.}5$ percent coupon and matures after eleven years. If current interest rates are $10$ percent, what should be the price of the bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

$

If after six years interest rates are still $10$ percent, what should be the price of the bond? Use Appendix B and Appendix D to answer the question. Assume that the bond pays interest annually. Round your answer to the nearest dollar.

$

Even though interest rates did not change in a and b$,$ why did the price of the bond change?

The price of the bond with the longer term is

$-$Select$-$

than the price of the bond with the shorter term as the investors will collect the

$-$Select$-$

interest payments and receive the principal within a longer period of time.

Change the interest rate in a and b to $6$ percent and rework your answers. Assume that the bond pays interest annually. Round your answers to the nearest dollar.

Price of the bond $($eleven years to maturity$)$: $

Price of the bond $($five years to maturity$)$: $

Even though the interest rate is $6$ percent in both calculations, why are the bond prices different?

The price of the bond with the longer term is

$-$Select$-$

than the price of the bond with the shorter term as the investors will collect the

$-$Select$-$

interest payments for a longer period of time.