You have been given the following information for an existing bond that provides coupon payments.

• Par Value: $2000
• Coupon rate: 6%
• Maturity: 4 years
• Required rate of return: 6%.

1. What is the Present Value (PV) of the bond?
2. If the required rate of return by investors were 11% instead of 6%, what would the Present Value of the bond be?

Look at the same Par Value $2,000

• Same Coupon rate: 6%
• Maturity: 10 years
• Required rate of return: 7%

1. What is the Present Value of the Bond now?

Explain how the longer maturities and higher required rate of return by investors affects the bond valuation.