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Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value,
Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 7%. At what price would the bonds sell? Round your answer to the nearest cent. $ b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round your answer to the nearest cent. $ C. Suppose that 2 years after the issue date (as in Part a) Interest rates fell to 7%. Suppose further that the interest rate remained at 7% for the next 8 years What would happen to the price of the bonds over time? 1. The price of the bond will remain the same. II. The price of the bond will rise, approaching $1,000 at the maturity date. III. The price of the bond will decline, approaching $1,000 at the maturity date. -Select
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