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Suppose Rot Gut Oil sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 12% coupon rate, and semi-annual coupon payments.
Suppose Rot Gut Oil sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 12% coupon rate, and semi-annual coupon payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price will the bonds sell? b. Suppose that, 2 years after the issue, the going interest rate had risen to 14%. At what price would the bonds sell? c. Suppose the conditions in Part (a) existed: that is, interest rates fall to 8%, 2 years after the issue date. Suppose, further, that the interest rate remained at 8% for the next 8 years. What would happen to the price of the Rot Gut Oil's bonds over time
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