On September 27, 2015, Koala, Inc. issued a 10 year bond (with a typical $1,000 face value) that had an annual coupon value of $65. [We are assuming that the 2021 coupon has just been redeemed.]

• Initially, the bond was sold at a discount price of $978.
• On September 27, 2021, this bond was selling at a premium for $1,010.
• The market rate of interest for a riskless corporate bond, of this maturity (i.e., a Treasury security), was 2.8% on September 27, 2015, which reflects market expectations about future rates of inflation.
• The market rate of interest for a riskless corporate bond, of this maturity (i.e., a Treasury security), was 1.9% on September 27, 2021, which reflects market expectations about future rates of inflation.

9. It is now September 27, 2021 and suddenly the Federal Reserve announces a new program to reduce inflation. Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond (i.e., a Treasury security), falls from 1.9% to 1.7%. If there is no change in the risk premium expected for this Koala, Inc. bond (#8), what will be this bonds yield to maturity? [To 2 decimal places.]

10. Following from #9, what must be the new selling price for this bond?