a) Shane Ltd issued 10-year coupon bonds 4 years ago with a coupon rate of 9%. At the time of issue, the bonds sold at par. Today new bonds of similar risk and maturity will pay a coupon rate of 7%. Assuming semi-annual coupon payments and a face value of $1,000 per bond, calculate the current market price of the companys bond.

b) Briefly explain the relationship between time to maturity and the change in bond prices.