During the course of your Chapter 11 studies, you should have noticed that bonds can be sold at a discount (less than 100% of face value), at par (equal to 100% of face value), or a premium (greater than 100% of face value). The important question is how is the sell price determined? what causes the sell price to be at a discount or a premium and why does the value change over time? To address this issue, I would like you to address the following problem: On Ja n ua ry 1, Big Daddy Corporation issues $10,000,000 of 9%, 15 year bonds, with interest paid semi- annually. The market rate of interest is 10%. Before we calculate the price, let's answer a few basis questions which will be important in determining the price