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D . How is the value of a bond determined? What is the value of a 1 0 - year, $ 1 , 0 0

D. How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%?
1. What happens to the bonds value in part d if inflation rises immediately after the bond is issued, causing rD to be 13%? What is the bonds value if rD increases to 15%? Would it be a premium or discount bond?
2. What would happen to the bonds value if inflation fell and rD declined to 7%? To 5%? Would it be a premium or a discount bond?
3. What would happen to the value of the 10-year bond over time if the required rate of return remained at 15%? If it remained at 5%?

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