A bond has the following terms:

Principle amount $1000

Semi--annual interest $50

Maturity 20 years

a. what is the bonds price if comparable debt yields12%?

b. what would be the price if comparable debt yields 12% and the bond matures after 5 years?

c. what are the current yields and yields to maturity in a. and b. ?

d. what would be the bonds price in a. and b. if interest rates declined to 8%?

e. what are the current yields and yield to maturity in d.? what two generalizations may be drawn from the above price changes?