Stanley, Inc. issues

10-year

$1,000

bonds that pay

$75

annually. The market price for the bonds is

$1,035.

The market's required yield to maturity on a comparable-risk bond is

7

percent.

a.What is the value of the bond to you?

b.What happens to the value if the market's required yield to maturity on a comparable-risk bond (i) increases to

11

percent or (ii) decreases to

5

percent?

c.Under which of the circumstances in part b should you purchase the bond?