Fiona Corporation has a 7% $1,000,000 bond issue with a maturity of 15 years. Due to a sudden surge in inflation due to our national debt, the market rate of interest is currently 8%. Interest is paid semi-annually. Show work!

a) Will the bond be sold at a premium, par, or discount?

b) What will be the price and the proceeds?

Four years after the original issue (#1 above), with 11 years remaining on the original bond, all banks are taken over the federal government and the current market rate of interest for all new bonds will be 3% (market rate of interest) and the current owner decides to sell his bond and move to China which has a stronger form of capitalism.

c) Will the bond be sold at a premium, par, or discount?

d) What will be the price and the proceeds?

Eight years after the original issue (#1 above) , with 7 years remaining, President Hillary realizes that the nationalization of banks by the federal government was not such a good idea, not that China will not lend any more money to the government. Since the country is so much in debt, and everything is free, the market rate of interest is no 12%. Ns. Choo offers to purchase this bond.

e) Will Ms. Choo pay a premium or discount to the original offering and a premium of discount to the secondary offering price?

What will be the price and the proceeds?