Suppose the Macau Toy Company sold an issue of bonds with a 10 year maturity, a $1,000 face value and a 10 percent coupon rate. Assume interest is paid annually.

1. Two years after the bonds were issued, the interest rate on bonds such as these fells to 6 percent. At what price would the bonds sell?
2. Suppose further that the interest rate remained at 6 percent for the next 8 years. What would happen to the price of Macau Toy Companys bonds over time?