Stanley, Inc. issues 20-year $1,000 bonds that pay $75 annually. The market price for the bonds is $863.

The market's required yield to maturity on a comparable-risk bond is 9 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 12 percent or (ii) decreases to 7 percent?

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