Kyser Public Utilities issued a bond with a $1,000 par value that pays $90 in annual interest. It matures in 20 years. Your required rate of return is 8 percent.

1a. If your required rate of return is 8 percent, what is the value of the bond? $________(Round to the nearest cent.)

1b_1. What is the value of the bond if your required rate of return increases to 13 percent? $_______(Round to the nearest cent.)

1b_2. What is the value of the bond if your required rate of return decreases to 4 percent? $_______(Round to the nearest cent.)

1c. Based on the answers in part b, a decrease in interest rates (the required rate of return) will cause the value of a bond to (increase/decrease) by contrast, an increase in interest rates will cause the value to (increase/decrease)

Also, based on the answers in part b, if the required rate of return (current interest rate):(Select from the drop-down menus.)

1. Equals the coupon interest rate, the bond will sell at (par/discount/premium)

2. Exceeds the bond's coupon rate, the bond will sell at (discount/par/premium)

3.Is less than the bond's coupon rate, the bond will sell at (par/premium/discount)

1d_1. Assume the bond matures in 10 years instead of 20 years. What is the value of the bond if your required rate of return is 8 percent? $_____ (Round to the nearest cent.)

1d_2. Assume the bond matures in 10 years instead of 20 years. What is the value of the bond if your required rate of return increases to 13 percent? $_____ (Round to the nearest cent.)

1d_3. Assume the bond matures in 10 years instead of 20 years. What is the value of the bond if your required rate of return decreases to 4 percent? $_____ (Round to the nearest cent.)

1e. From the findings in part d, we can conclude that a bondholder owning a long-term bond is exposed to (greater/less) interest rate than one owning a short-term bond.