A 17-year, $1,000 par value zero-coupon rate bond is to be issued to yield 7 percent.

a.What should be the initial price of the bond? (Take the present value of $1,000 for 17 years at 7 percent, using Appendix B.)

b.If immediately upon issue, interest rates dropped to 6 percent, what would be the value of the zero-coupon rate bond?

c.If immediately upon issue, interest rates increased to 9 percent, what would be the value of the zero-coupon rate bond?