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.
2. 1. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6 percent. At what price will the bond sell?
3. 2. Suppose that, two years after the initial offering, the going interest rate on bonds such as these fell to 6 percent. At what price will the bonds sell?
4. 3. 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.