Problem 13-08

Bond A has the following terms:

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

Bond B has the following terms:

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

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.

1.. Price of bond A: $?????

Price of bond B: $ ??????

What will be the price of each bond if, after three 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.

2. Price of bond A: $?????

Price of bond B: $ ??????

What will be the price of each bond if, after seven years have elapsed, interest rate is 10 percent? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar.

3. Price of bond A: $???????

Price of bond B: $ ??????