Problem 13-08

Bond A has the following terms:

• Coupon rate of interest (paid annually): 12 percent
• Principal: $1,000
• Term to maturity: Ten years

Bond B has the following terms:

• Coupon rate of interest (paid annually): 6 percent
• Principal: $1,000
• Term to maturity: Ten years

1. What should be the price of each bond if interest rate is 12 percent? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar. Price of bond A: $ Price of bond B: $

2. What will be the price of each bond if, after four years have elapsed, interest rate is 12 percent? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar. Price of bond A: $ Price of bond B: $

3. What will be the price of each bond if, after ten years have elapsed, interest rate is 11 percent? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar. Price of bond A: $ Price of bond B: $