You buy a 7 percent, 20-year, $1,000 par value floating rate bond in 1999. By the year 2014, rates on bonds of similar risk are up to 9 percent.

What is your one best guess as to the value of the bond?

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2.

Fourteen years ago, the Archer Corporation borrowed $6,150,000. Since then, cumulative inflation has been 73 percent (a compound rate of approximately 4 percent per year).

a. When the firm repays the original $6,150,000 loan this year, what will be the effective purchasing power of the $6,150,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

b. To maintain the original $6,150,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)