What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return?
a. 5 percent
b. 7 percent
c. 12 percent
(At maturity, the bond will be retired and the holder will receive $1,000 in cash. Bonds are typically issued with $1,000 face, or par, values. The actual market value at any point in time will tend to rise as interest rates fall and fall as interest rates rise.)