Stanley, Inc. issues 10-year $1,000 bonds that pay $80 annually. The market price for the bonds is $1,070. 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 13 percent or (ii) decreases to 5 percent?

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