1. Suppose Ford Motor Company sold an issue of bonds with a 20-year maturity, a $1,000 par value, a 10 percent coupon rate, and semi-annual interest payments.

1. Suppose that, two years after the initial offering, the going interest rate on bonds such as these rose to 14 percent. At what price will the bonds sell?
2. Suppose that the conditions in part (a) existedthat is, interest rates fell to 6 percent two years after the issue date. Suppose further that the interest rate remained at 6 percent for the next eighteen years. Describe what would happen to the price of the Ford Motor Company bonds over time.