Assume Venture Healthcare sold bonds that have ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bonds were issued, the required interest rate fell to 7 percent. What would be the bonds' value? Nper Pmt FV Rate (Number of Payments = number of years at interest rate * amount of payments each year) (Payment - Coupon Amount = par value * coupon rate) (Future Value - Principal) (Interest Rate = Interest Rate * amount of payments each year) PV Because interest rates have fallen since the bond was issued, it is selling at a premium. b. Suppose that two years after the bonds were issued, the required interest rose to 13 percent. What would be the bond's value? Because interest rates have risen since the bond was issued, it is selling at a discount. c. What would be the value of the bonds three years after issue in each scenario above, assuming rates stayed steady at either 7 percent or 13 percent? At 7 Percent: Note that the value has fallen over the year. If interest rates stay constant, a bond selling at a premium will lose value over time. At 13 Percent: Note that the value has increased over the year. If interest rates stay constant, a bond selling at a discount will gain value over time